After the Bell: Choppy Grain Trading Session on U.S./China Trade Uncertainty

Posted on 12/06/2018 2:53 PM

Corn:  Corn closed lower and about at midrange after holding key gap support this morning. March futures ended down 1 ½ cents at $3.82 ¾. U.S./China trade tensions escalated overnight on news Meng Wanzhou, CFO of Chinese telecommunication giant Huawei was arrested in Canada at the request of the U.S. on charges of violating U.S. sanctions against Iran. Stocks fell sharply and the dollar is on the defensive, adding to the risk-off sentiment in the grain markets. The corn market did find some limited support from an uptick in exports. USDA announced private exporters sold 198,120 MT to Mexico, with 106,680 MT for delivery in 2018-19 and 91,440 MT for shipment in 2019-20. However, Algeria bought 40,000 of Argentine corn overnight. Weekly ethanol production rose 2% to 1.069 million barrels per day (BPD) in the week ended Nov. 30, the highest since Aug. 31. The prior four-week average was 1.056 BPD. A year ago, production was 1.108 BPD, about 3.5% higher. Inventories of ethanol last week rose 100,000 barrels to 23.03 million barrels. Average ethanol price last week was $1.22, down 5 cents from a week earlier and 13 cents lower than a year ago.

Soybeans:  Soybean futures closed down 2 1/4 cents to 4 cents through the November contract, but nearer their daily highs. Soybean meal closed down mostly 60 cents to $1.90, while bean oil ended 10 to 15 points lower in most contracts. Soybean traders were a bit unnerved today regarding Chinese demand and the timing of any purchases, much less the ability of the U.S. and China to reach a trade deal, after Canada confirmed it arrested the chief financial officer of Huawei Technologies, one of China’s most important brands. The move, reportedly for alleged violations of U.S. sanctions against Iran, outraged China, which called for her immediate release. The U.S. wants her extradited. China agreed to buy 300,000 MT of Argentine soyoil from its 2018-19 crop, according to the chief of staff for the ag minister. That compares to purchases of 120,000 MT over the past three years. But China is not interested in buying Argentine soymeal at this time. Friday's USDA weekly export sales report (delayed by one day this week) is expected to show 2018-19 soybean sales of 600,000 to 900,000 MT.

Wheat: Winter wheat futures finished mostly around 2 cents lower in all but the soon-to-expire December contracts. December SRW wheat lost 9 1/4 and December HRW finished down 7 3/4 cents. Spring wheat futures ended mostly 4 to 6 cents lower. Futures were on the defensive amid export demand concerns. Ideas Egypt continues to struggle with financing raises questions about demand from the world’s largest buyer. Egypt's state grain buyer, the General Authority for Supply Commodities, bought 350,000 MT of wheat today. Of the total, GASC bought 290,000 MT of Russian wheat and 60,000 MT of Ukrainian wheat. Wheat was also pressured on a bigger crop forecast in Canada. Stats Canada said wheat production rose 6% to 31.77 million metric tons MMT, up from 29.98 MMT last year and above the average trade estimate for a crop of 31.4 MMT. Due to Wednesday’s national day of mourning for President George H.W. Bush, USDA’s export sales figures for the week ended Nov. 29 are delayed until Friday morning. The report is expected to show 2018-19 U.S. wheat sales of 300,000 to 600,000 MT.

Cotton Prices closed sharply lower and in the bottom 25% of today’s trading range. March cotton fell 207 points to close at 70.08 cents. China on Thursday demanded Canada release a Huawei Technologies executive who was arrested in a case that adds to technology tensions with Washington and threatens to complicate trade talks. Huawei's CFO Meng Wanzhou was arrested on Dec. 1 over claims she violated sanctions against Iran. The CFO of the world’s biggest telecommunications company faces possible extradition to the United States. Cotton prices followed the U.S. stocks market sharply lower today on worries the trade truce may fail to lead to substantive trade dialogue and an end to Chinese cotton tariffs.  Some support may develop at current levels on reports India's crop could drop 12% to the lowest level in nine years as limited rainfall in the top two producing states has slashed crop yields, potentially cutting exports from the world's top producer in half. Lower cotton shipments from India will allow rivals such as the U.S., Brazil and Australia to increase cargoes to key Asian buyers such as China and Pakistan. It may also support global prices that have fallen 16% since hitting a four-year peak in June.

Hogs Futures ended lower but near the session highs. February hogs fell 85 cents to close at $66.90, while April futures also dropped 85 cents to $71.275. Hog prices opened sharply lower after a fresh twist in the U.S./China trade relations. Tensions escalated overnight on news Meng Wanzhou, CFO of Chinese telecommunication giant Huawei, was arrested in Canada at the request of the U.S. on charges of violating U.S. sanctions against Iran. Stocks fell sharply and the dollar is on the defensive. Worries about U.S. pork exports to China encouraged market bulls to take profits on long positions, with deferred futures trading at larger-than-normal premiums to cash hogs. Still, China reported another case of African swine fever today. Wholesale pork carcass price fell 11 cents at midday, led by losses in belles, ribs, butts and picnics. Sales were modest after slowing Wednesday from Tuesday’s strong showing. Morning cash hog prices were slightly higher than Wednesday. Earlier today hog processor margins were estimated at $40.35 a head, up from $29.05 a week earlier, according to HedgersEdge.com.

Cattle:  December live cattle closed down 35 cents. February live cattle finished down 57 1/2 cents and April futures were down 40 cents on the day. Futures closed near midrange today. Feeder cattle futures saw January down $1.275 and March down $1.10. Pressure on deferred live cattle came from some profit-taking from recent gains and ample feedlot inventories. The lead December live cattle futures contract is nearly in-line with where traders expect this week’s cash trade to occur. Traders continue to wait on active cash cattle trade to develop, though most traders expect firmer prices to develop at some point tomorrow. The online Fed Cattle Exchange on Wednesday reported trade at an average price of $117.83, up about $1 from the previous week’s sales. Light cash trade was also reported in the Iowa market at similar prices yesterday. Choice boxed beef values softened 43 cents this morning, while Select was up $1.20, on light movement of 57 loads.

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