After the Bell: Corn, Soybeans Rise on China Trade Deal Optimism; Livestock Soar

Posted on 04/04/2019 3:32 PM

Corn: Futures rose 1 to 2 cents and closed in the upper half of today’s trading range. May corn gained 2 ½ cents to close at $3.65 ¼ with the December up 1 ½ cents to $3.92 ¼. Prices are underpinned by signals that U.S. and China are nearing a trade deal. Top-level U.S./China trade talks continued today in Washington. Trump wants a lot and talks have narrowed the gap, with China apparently ready to open its wallet and buy a lot of U.S. goods. The key is how much and how soon to turn the corn market sentiment around. The market is still recovering from the 17-cent plunge last Friday when USDA said March 1 inventories were 270 million bu. more than expected. Also, sustained rallies will be tough with farmers holding 60% of those inventories. The market also found support from forecasts for a major winter storm next week that may target Nebraska, South Dakota, Iowa and Minnesota. The outlook is also wet into late April from much of the central U.S as storms march from the Pacific Northwest to the East Coast. The North Atlantic Oscillation (NAO) will plunge into a significant negative phase event next week, which will contribute to cooler temperatures in North America. The threat of significant planting delays encouraged some light short-covering. USDA’s export sales report was bearish, as exporters sold just 537,300 MT of corn the week ended March 28, down 31% from the prior four-week average and well below trade guess for new sales of 700,000 MT to 1.1 MMT. New-crop sales totaled a light 93,000 MT.

Soybeans:  Soybean futures finished around 7 cents higher today and near session highs. Meal futures gained nearly $1 in most contracts, while soyoil was nearly 40 points higher. Hopes a trade deal between the U.S. and China will soon be completed helped fuel gains in the soybean market today. The two sides are reportedly close to a 10-year deal. If President Donald Trump and Chinese President Xi Jinping announce a summit meeting that would be a strong signal the deal is completed. Some reports said that announcement could come from Trump as early as sometime today. Weekly soybean export sales were stronger than expected this morning at 1.972 MMT for 2018-19 and 20,500 MT for 2019-20. China was the primary buyer of U.S. old-crop soybeans with purchases of 1.7 MMT. China was also the lead destination for U.S. soybeans in the week ended March 28, taking shipment of 265,100 MT.

Wheat: SRW wheat futures were unable to hold onto early gains and the market ultimately settles split with nearbys fractionally lower and deferreds fractionally higher. HRW wheat ended midrange and 1 ½ to 2 ¾ cents higher. Spring wheat settled low-range and down 3 ¾ to 7 ½ cents, with futures hitting yet another round of new contract lows. Spring wheat futures dropped to new contract lows again today as traders focused on trade tensions between Canada and China and the resulting restrictions on Canadian canola shipments to Beijing. This is expected to cause Canadian growers to favor spring wheat plantings over canola, presenting more competition for the U.S. HRS crop. Further, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership lowered tariffs on wheat from the EU, Canada and Australia into key buyer Japan as of April 1, while tariffs on U.S. wheat held steady. Trade talks between Japan and the U.S. are expected to kick off mid-month, but Japan has resisted bringing agriculture into the conversation and deals take time. Winter wheat futures saw an early bump from USDA’s Weekly Export Sales Report that showed stronger-than-expected old- and new-crop wheat sales tallies of 704,700 MT and 312,800 MT, respectively. But strength was short-lived given the aforementioned concerns. A firmer dollar added pressure.  

Cotton: Futures closed higher with front month’s leading the price strength. May as up 27 points to 77.32 cents and December gained 4 points to 76.29 cents. Futures rose on improved U.S. export sales, although shipments remain behind the pace needed to reach USDA’s export forecast. Private exporters sold 322,100 bales of cotton last week, up 47% from the prior week. The biggest buyers were Vietnam for more than 100,000 bales and China scoping up 59,000 bales. China also bought 118,000 bales for new-crop delivery. U.S. President Donald Trump said on Thursday that China will be buying a lot of products from the United States as the world's two largest economies try to sort out a trade dispute. China and the United States are in the middle of negotiations to end a months-long trade war that has rattled global markets. After meetings in Beijing last week, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are holding talks with a Chinese delegation in Washington this week.

Hogs: Lean hog futures shot higher for the third day in a row, with June and later contracts settling at or just under their $3.00 limit higher. April hogs finished 50 cents higher and May futures posted a $2.425 gain. Most months hit new contract highs today. Lean hog futures dropped sharply lower in corrective trade last week but that action set the stage for another sharp move to the upside this week as a U.S./China trade deal appears to be in reach. Big reductions in the Chinese hog herd means the country (and likely many of its neighbors in Southeast Asia) will need to import pork. And the removal of retaliatory tariffs on U.S. pork would make doing so all the more attractive. That prospect has turned the narrative around for a hog sector that might otherwise be struggling to chew through a 2% to 3% increase in supplies. It has also limited concerns about Mexico’s tariffs on U.S. pork and tensions between the countries regarding the border and immigration.   

Cattle: Fed cattle futures and feeders were sharply higher today. April cattle jumped $1.775 to $127.55 and June rallied $2.575 to $121.575. May feeders rallied $2.80 to close at $150.075. The potential for a major winter storm by late next week sent cattle and feeder cattle sharply higher while the surge in hog prices got the rally rolling this morning. The North Atlantic Oscillation (NAO) will plunge into a significant negative phase event next week, which will contribute to cooler temperatures in North America. The high-pressure ridge over Greenland will force cold air much further sought while several waves of moisture move into the U.S. from the Pacific Ocean and get additional moisture boost from the Gulf of Mexico.  News of the final push on a trade deal between the U.S. and China dominated agricultural markets today. Hogs are leading the rally, but soybeans and other markets are benefiting too. Hogs also continue to receive support from two fresh outbreaks of African swine fever in China, with one in a new province. Cambodia also reported an outbreak of the disease yesterday. Weekly beef sales rose 58% to 20,500 MT from a week earlier and 18% above the four-week average, USDA data this morning showed.  

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