After the Bell: Soybeans Retreat on Smaller Chinese Purchases. Corn Rallies a Third Week

Posted on 12/14/2018 2:44 PM

Corn: Corn futures closed the day up 1/4 to 1 1/4 cents and near midrange through the September contract. For the week, March corn slipped 3/4 cent. The corn market did not get a lot of traction today on the report that China may buy at least 3 MMT of U.S. corn as soon as January, according to Bloomberg News. China would need to waive or eliminate the current 25% tariffs for U.S. corn to be competitive with Black Sea and South America supplies. Traders will be closely watching daily and weekly USDA export sales announcements for confirmation of the China demand. USDA's daily export sales reporting service announced 125,000 MT of corn sold to Japan for delivery this marketing year. U.S. corn has seen better export demand recently, to suggest that downside price action will be limited into the end of the year. Corn prices are following a normal seasonal trend to rally into year-end. Exports are robust but are offset by slowing ethanol production with margins near record lows. Domestic animal numbers are growing and support strong feed use.  

Soybeans: Futures fell to the lowest in a week, extending a two-day retreat to close near weekly lows. January soybeans fell 6 ½ cents to close $9.00 1/2, ending the week down 16 ¼ cents. January soymeal closed $3.90 lower this week at $307.30 a ton, while January soybean oil fell 18 points this week to 28.49 cents a pound. This morning, USDA daily export sales reporting service said private exporters sold 300,000 metric tons (MT) to China for delivery in 2018-2019. That follows a daily sales announcement of 1.13 million MT reported sold to China on Thursday. Total for the two days is 1.43 MMT, still below the 2.5 MMT to 5 MMT talked about earlier this week. The light sales tally increased trader disappointment in the soybean market after President Trump indicated earlier this week China was buying a `tremendous amount’ of soybeans. USDA also announced 130,000 MT sold to unknown destinations which probably is not new Chinese buying because Beijing would like to publicize new sales amid ongoing trade negotiations with the White House. Traders will be hanging on each morning’s export sales report that exporters are required to file with USDA on any purchases greater than 100,000 MT.  Some sales may have been made below that threshold and will show up in the weekly updates on Thursday. The market will need a steady stream of daily sales in excess of 500,000 MT to 1.0 MMT to re-energize the bulls.  

Wheat: SRW wheat futures finished around 5 to 6 cents lower today, with HRW contracts 1 to 2 cents lower and HRS contracts mostly 2 to 4 cents lower. For the week, March SRW wheat futures slipped 1 1/4 cents, March HRW futures firmed 6 1/4 cents and March HRS futures firmed 3 1/2 cents. The prospects for U.S. wheat exports are improving. Global wheat prices are rising, suggesting supplies held by major exporters are tightening. The market could get more clarity on that front next week as Russia’s ag ministry is scheduled to meet with exporters on Friday. If Russia restricts exports, it would be price-supportive for wheat futures.  China is also expected to buy U.S. wheat as part of its commodity purchases in an attempt to smooth over trade relations with America. In fact, our best China sources say the country booked some U.S. wheat this week. The market is going to need a constant dose of bullish demand news to encourage sustained buying in futures.  

Cotton: Cotton futures closed slightly higher Friday and near midrange, bouncing back from early losses and paring this week’s decline. March cotton ended down 19 points at 79.60 cents a pound. The contract fell 63 points this week.  The market was relatively resilient this week despite negative news, a sign of underlying demand. The markets shrugged off USDA forecasting a bigger crop and unexpectedly raising its U.S. and world carryover forecasts. The market also was able to cast aside weakness in U.S. and global stock markets and a surge in the value of the dollar against a basket of currencies, to a 19-month high.  U.S. consumer spending gathered momentum in November as households bought furniture, electronics and a range of other goods, which could further allay fears of a significant slowdown in the American economy. The upbeat data from the Commerce Department on Friday bolstered ideas that clothing sales for holiday gift giving will be up, boosting demand for U.S. cotton exports to countries that make the clothes.    

HogsFebruary and April hogs finished 32 1/2 and 30 cents lower, respectively today, while the December and summer-month contracts posted slight gains. For the week, February hogs dropped $3.375. A disappointing finish to this week’s trade gives bears the solid upper hand for early next week. Traders have grown tired of waiting on the cash market to put in a seasonal low. Unless the cash market shows sustained strength, buyer interest is likely to be limited, as traders already have greater-than-normal seasonal price recoveries built into deferred futures. USDA’s Hogs & Pigs Report on Thursday will signal whether producers have reined in expansion. China is starting to buy U.S. commodities as it tries to work out a broader trade deal with the United States. Given China’s issues with African swine fever, it is expected China will ramp up its U.S. pork buys. Key will be if/when China removes the tariffs on U.S. pork shipments.  

Cattle: December live cattle futures closed up 12 1/2 cents at $119.575 and hit a new contract high today. February live cattle closed down 45 cents and the April contract was down 30 cents. Feeder cattle futures were down 40 cents in the January contract and off 15 cents in the March. For the week, February live cattle gained 87 1/2 cents. On the week, January feeders were up $3.20. Reports today saw cash cattle trade in the $118 to $119 range, which is right around the price level the trade was expecting this week. This is the fourth straight week packers have paid up for cash cattle. Futures should be supported early next week, as beef prices are at the highest level for this time of year since 2014, signaling strong consumer demand. Preparations for Thursday’s USDA Cattle on Feed Report may limit price activity. Beef packers would not be scheduling large Saturday kills if beef wasn't moving well to grocers and restaurants. Demand also remains good for filling export shipments, which have been running about 10% above a year ago the last several weeks. A strong demand base is important as production continues to expand.  

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