After the Bell: Firming Grain Markets on Optimism U.S./China Talks Make Progress

Posted on 01/30/2019 3:31 PM



Corn: Corn futures prices ended the day with decent gains, at up 2 1/2 to 3 1/2 cents and near their daily highs.  Short covering was featured in the corn futures market today. Frigid weather in the Midwest will increase demand for corn in feed rations during the month ahead. Firming interior basis bids also suggest tightening available supplies and a smaller 2018 crop. USDA updates its crop supply and demand table on Feb. 8. Record global usage will also support demand for U.S. corn this year. Ag market participants remain nervous but optimistic ahead of the two days of high-level U.S./China trade talks that began this morning in Washington. Corn would benefit from increased Chinese buying of farm goods, including corn.  Corn traders are awaiting Thursday morning's weekly USDA export sales report, after five weeks of no weekly data due to the government shutdown.

Soybeans: Soybean futures closed slightly higher and near midrange as March rose 2 cents to close at $9.21 while November gained 2 cents to $9.60. Meal futures closed down 60 to 90 cents while soybean oil gained around 30 points in most contracts.  Officials from the U.S. and China have until March 1 to come to a lasting trade deal and avoid further escalation of tariffs. Hopes continue to focus on this week’s two-day meetings to make enough progress to stave of new tariffs. Xinhua News reports that China's parliament will likely pass in March a new foreign investment law that will ban forced technology transfer and illegal government "interference" in foreign business practices. This may be a significant concession, though enforcement of the law will be key. South America weather is leaning more price-positive as much of Brazil was dry the past 24 hours and is expected to stay that way into the weekend before storms return through Feb. 6. Another rain event is possible after Feb. 11. Crop stress may increase as evaporation rates exceed precipitation, increasing risks for additional yield losses.  More rain is expected in Argentina the remainder of this week before a drying trend develops next week.   

Wheat: Winter wheat futures rose 2 to 3 1/2 cents today with March SRW up 3 ½ cents to $5.15 ¾ and March HRW gaining 2 cents to close at $5.02 ¼. Spring wheat futures rose 3 ¼ to 3 ¾ through the September contract. Funds sold the market yesterday after U.S. wheat was shunned by Egypt even though it was the lowest-cost supplies loaded on a ship. Today, the market failed to make additional headway to the downside and funds bought back short positions. The U.S. lost out on sales to Egypt because of more expensive ocean freight. The good news is that Russian wheat export prices are rising, and the U.S. will eventually gain market share in markets where freight rates are more competitive. Some additional support came from the coldest U.S. weather in several years this week with as much as 20% of the winter wheat crop vulnerable to some damage risks.

Cotton:  Cotton futures finished up around 25 points and nearer their daily highs. Selling pressure in the cotton market was very limited today amid a solid rally in the U.S. stock market and good gains in the crude oil market. A lower U.S. dollar index also aided the cotton bulls. Officials from the U.S. and China have until March 1 to come to a lasting trade deal and avoid further escalation of tariffs. Hopes remain for solid progress in the two-day meeting that began today, although a breakthrough may not happen immediately. Cotton traders are eagerly awaiting Thursday morning’s weekly USDA sales report, after a five-week hiatus in the data due to the government shutdown. Tomorrow’s data will be for the week ended Dec. 20. The Feb. 8-10 National Cotton Council meeting is also coming up on traders’ radar screens, including its producer survey due for release on Saturday, Feb. 9.

Hogs:   February lean hogs closed up 12 1/2 cents, but the April and June contracts were down around 25 cents. Prices finished closer to their daily lows. Hog futures prices were pressured today in part by wholesale pork prices being down $1.22 in today's midday report, with losses reported in all cuts. Movement was 186.32 loads. While record cold weather in the Midwest will likely curtail hog slaughter this week, such will be negative for the cash markets once more seasonal temperatures return by next week, due to the backlog in marketings. The Chinese ministry of agriculture on Tuesday said it would prioritize the supply of live pigs in the country by any measure possible following the outbreak of African swine fever, which is forecast to have cut the herd by about a fifth, according to AgriCensus. The hog market bulls have been disappointed in recent weeks by the lack of premium put into the hog futures market because of this situation. Meanwhile, the National Pork Producers Council is asking the U.S. and China to quickly resolve their trade differences and for the Asian nation to make a minimum $3.5 billion purchase of U.S. pork over the next five years.

Cattle: Live cattle and feeder cattle futures closed mostly higher, with only the front-month contracts lower. February live cattle closed down 32.5 cents at $126.15 while April rose 25 cents to $128.05. January feeders were down 27.5 cents to $142.375 as March rose a nickel to $144.30. Midday wholesale beef prices rose Wednesday with Choice up 26 cents and Select jumping $1.16. Sales were strong. USDA reports carcass weights down 10 lbs. from a year ago in the week ended Dec. 15, leaving everyone wondering just how low carcass weights will go in 2019 given the current poor feedlot conditions. Trading was slow today with charts overbought, though cash market fundamentals remain strong. A period of consolidation seems likely.  USDA will release the delayed January Cattle on Feed Report and the Annual Cattle Inventory Report on Feb. 22. The February Cattle on Feed Report will be delayed from Feb. 22 to March 8.   

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