After the Bell: New China Tariff Threats Weigh

Posted on 08/23/2019 3:33 PM

Corn: December corn futures closed down 3 1/4 cents at $3.67 3/4. Prices closed at a three-month low close and scored a technically bearish weekly low close today. On the week December corn lost 13 cents. China said Friday it will impose an extra 5% tariff on U.S. soybeans from Sept. 1, and additional 10% duties on U.S. wheat, corn and sorghum from Dec. 15, in Beijing's latest retaliatory trade moves against Washington. No one was expecting movement on the trade front, but this announcement from China and President Trump’s strong retaliatory response on Twitter shifts the U.S./China trade war into high gear. Argentina corn is still the cheapest origin to Asia, despite the fall in U.S. prices. Questions of U.S. production will lend support but little upside until we can take some supply out of the balance sheets. After the close, Pro Farmer pegged the U.S. corn crop at 13.358 billion bu., with an average yield of 163.3 bu. per acre. The National Weather Service is forecasting cool and wet to close out August; crops need sunshine and heat.

Soybeans: November soybeans closed down 12 1/4 cents at $8.56 1/2. Prices closed at a three-month low close today and also scored a technically bearish weekly low close. For the week, November beans lost 23 1/4 cents. China trade retaliation put the market back on its heels to finish the week after Pro Farmer crop scouts found declining yield potential this week during tours of the seven top producing states. Pro Farmer’s U.S. soybean crop estimate came in at 3.497 billion bu. of production, with an average yield of 46.1 bu. per acre. China has purchased about only half the U.S. soybeans it pledged to buy earlier this year, a USDA official said on Thursday, after a small sale was reported. Crops need sunlight, heat and time to finish. The 6 to 10-day outlook is cool and wet and there is already a lot of speculation about when the first freeze will hit.

Wheat: December SRW futures closed up 6 cents at $4.77 3/4, with December HRW futures finishing up 1/2 cent. For the week, December SRW added 1/4 cent, while December HRW lost 4 3/4 cents. Wheat traded both sides of unchanged today with the weakness in corn and soybeans limiting buying interest in wheat. U.S. and Japanese officials held talks Thursday in hopes of reaching an ag and autos trade deal by September. Spring wheat harvest is underway, keeping a damper on HRS wheat prices. U.S. exports are proving stronger than expected as price weakness is pushing both Asian and South America buyers to step up their purchases.

Cotton: December cotton futures closed down 73 points 58.21 cents today. Prices hit a two-week low and closed at a technically bearish weekly low close. On the week, December cotton lost 192 points. The escalation in the U.S./China trade war, as China imposed new tariffs on U.S. imports which was followed by harsh retaliatory tweets from President Trump, and an ensuing sharp selloff in the U.S. stock market set the cotton futures market back today. Prices are back near the August low and early next week the bears will be looking to challenge those lows, or levels still lower.

Cattle: October live cattle futures closed down $1.70 at $99.40. For the week, December live cattle gained $1.35. November feeder cattle futures closed down $2.775 at $132.30 and closed at a bearish weekly low close. For the week, November feeders lost 45 cents. The cattle markets dropped after China announced plans to raise tariffs on U.S. beef imports. Frozen boxed beef values at the end of July rose much more than the seasonal average during July, topping our expectations. Cash cattle trade picked up in Iowa on Thursday between $109.50 and $110, with Kansas seeing some light sales at $105 and Nebraska at $108. That’s steady with week ago levels. The market was awaiting USDA’s Cattle on Feed Report Friday afternoon.

Hogs: October lean hog futures closed down the $3.00 limit at $59.30. Prices hit a 13-month low today and closed at a bearish weekly low close. For the week, October hogs fell $2.70. The market fell sharply after China’s announced retaliatory tariffs on U.S. pork imports, and an aggressive response via Twitter from President Trump. Cash hog bids continued to slide this week, and the pork cutout value remains under pressure. That gives little incentive for buying in the hog market. Thursday afternoon’s monthly USDA cold storage data came in roughly as expected.

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