After the Bell: Grains, Soy Surge on U.S.-China Trade Truce, Weather

Posted on 10/11/2019 2:40 PM

Corn:  December corn futures closed up 17 1/2 cents at $3.97 3/4, hit a two-month high and closed at a technically bullish weekly high close. For the week, December corn gained 10 3/4 cents. The corn market bulls put in a very impressive performance Friday, after being drubbed on Thursday in the wake of a bearish monthly USDA supply and demand report. The thinking today was that USDA was premature in raising its yield forecast yesterday after this week’s cold, wet and snowy weather increased crop risks. Look for some follow-through technical buying interest, including speculative fund short covering, in corn futures early next week.The U.S.-China trade news late this week was positive. A formal announcement of a partial trade deal ahead of trading on Monday morning would provide a psychological boost for all the grain markets.Traders next week will also be assessing weekend weather in the Midwest, with corn harvest in full swing. Hard freezes from Canada down to north Texas will end the growing season for the corn crop still maturing in the northern Corn Belt. Next week looks drier to start, with weather models divided about when and to what extent rains return by late next week.

Soybeans:  Soybeans extended a third weekly gain on Friday, reaching the highest since June 25. November soybeans rose 12 ½ cents to $9.36, capping a 19 3/4-cent gain this week. December soybean meal rose $7.10 to $310.80 this week and December soybean oil futures rose 11 points to 29.97 cents.  Prices erased Thursday’s retreat on optimism some type of U.S.-China trade truce would be reached this week. The U.S. and China reached a partial agreement Friday that would broker a truce in the trade war and lay the groundwork for a broader deal that Presidents Donald Trump and Xi Jinping could sign later this year, according to Bloomberg. As part of the agreement, China would agree to some agricultural concessions and the U.S. would provide some tariff relief. Brazilian farmers have been big sellers of the rally this week as prices in Brazilian currency terms are at or near records and the U.S. and China may be nearing a deal that could slow exports next season. The rally will entice more acres into productio

Wheat: Wheat futures strengthened into the close, ending with gains of 12 to 16 cents in winter wheat markets and 12 to 13 cents in spring wheat contracts. For the week, December SRW futures firmed 17 1/2 cents, December HRW futures strengthened 15 1/2 cents and the December HRS contract rallied 12 cents.  Bulls carry momentum into next week. Key to price action next Monday will be details from the reported interim trade deal with China. Unless the deal falls short of market expectations, wheat futures, along with the rest of the grain and soy complex, is poised for followthrough buying. Barring a strong price rally over the next month, winter wheat acreage is likely to decline for next year’s crop. A drop in acreage would put more focus on weather and crop conditions. While there is some dryness in the Southern Plains, there isn’t enough to get traders concerned unless fall conditions are really dry.  

Cotton:  Futures jumped to the highest in 10 weeks and closed near session highs. December cotton rose 246 points, or more than 4%, to 63.88 cents on Friday. The contract was up for a third straight week. The market jumped higher today on signs the U.S. and China may make an interim deal after intense talks and fresh threats. The U.S. and China have tentatively agreed to another deal that could lead to a truce in their trade war, Bloomberg reported. Beijing has invited U.S. officials for further talks in China, CNN reported. The rising violence during the democracy protests in Hong Kong and soaring food prices from the pork production lost to African swine fever probably helped to make China more willing to make deal with the U.S. so it can deal with its home-grown problems. The market was also supported today by sub-freezing temperatures as far south as north Texas this morning that may prevent some bolls from opening, potentially reducing this year’s crop.  

Hogs:  December lean hogs closed up $1.125 at $69.60 today. Prices closed near mid-range but did close at a technically bullish weekly high close today. For the week, December hogs gained $2.35. The hog futures market was supported today by the renewed optimism for progress on China-U.S. trade talks. Reports at midday said a partial deal had been reached, but traders should know more when futures trading begins Monday morning. Market watchers know the U.S.-China trade war has had many ups and downs and surprises. Look for some follow-through technical buying on Monday, following Friday’s bullish weekly high closes in hog futures. Hog slaughter remains at record levels and requires stronger demand to clear the supplies. China’s buying splurge this week to cover African swine fever losses may get other nations lining up to increase their own pork purchases before prices rise to higher levels.  

Cattle: Live cattle futures posted gains of 70 to 77 1/2 cents and finished high-range. Feeder cattle futures ended narrowly mixed. For the week, December live cattle futures firmed $1.375, while November feeder cattle strengthened $2.875. A rising tide lifts all boats and today was no exception for the cattle market. News of an interim Chinese trade deal helped fuel the high-range close in the cattle market. Details of the deal were still awaited when the market closed today, so that will partially guide price action next week. Active cash cattle trade was still awaited as well, though firmer prices seem most likely. Barring an unexpected bearish event from now until Monday, cattle futures should continue to favor the upside early next week. While supplies are plentiful, demand is more than keeping up. Given strong margins, beef plants in the Southern Plains are making up for the closure of the Holcomb, Kansas, plant. Plus, feedlots remain very current. Seasonally, cash cattle prices and futures should continue to rally.

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