After the Bell: Markets Testing Support Waiting for China Trade Clarity

Posted on 11/21/2019 3:24 PM

CornFutures ended slightly higher and near midrange. December corn was up 1 ¾ cents at $3.68 ½ with March futures also gaining 1 ¾ cents to $3.79. Corn prices rebounded from nine-week lows on more signs of improving U.S. corn export prospects. USDA reported private exporters sold 106,000 MT to unknown destinations for delivery in 2019-20. That follows sales announcements Monday and Tuesday totaling 322,000 MT. USDA also reported weekly export sales of 788,000 MT last week, up 36% from the prior week and 49% higher than the four-week average. Mexico was the top buyer and shipper last week. Ethanol production also rose over the latest period, marking the eighth straight weekly increase, with inventories also sliding.  Heavy rains this week and more forecast for next week increase risk for further field losses of remaining unharvested crops. The outlook for USDA to confirm a smaller crop in the final summary in January may help to put a floor under prices into year’s end. However, weather in South America continues to cap rallies with rains likely into mid-December in from Argentina, through Paraguay and into Brazil.  

Soybeans: January soybeans closed down 4 cents at $9.01 and hit a seven-week low today. December soybean meal closed up $1.20 at $301.00. December bean oil lost 51 points today at 30.69 cents. The U.S./China trade talks remain on the front burner for grain traders, but the assessments of the situation this week have deteriorated. The Wall Street Journal today reported Chinese Vice Premier Liu He invited U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to China for a new round of face-to-face talks. Other reports indicate the White House still wants China to agree it would make commitments on intellectual-property protection, forced technology transfers and agricultural purchases. Rolling back U.S. tariffs also remains a major sticking point. President Trump has made several comments on the matter this week, which traders have deemed as being downbeat. U.S. exporters sold 1.517 MMT of soybeans last week, up 39% from the prior four-week average, with China buying 568,600 MT, USDA reported today in its weekly report. Sales topped expectations.

Wheat: March SRW wheat futures closed down 6 3/4 cents at $5.12. March HRW wheat futures lost 4 1/2 cents at $4.28 1/2. Spring wheat futures are down about 6 cents. The wheat futures market today saw spillover selling pressure from lower corn and soybean futures prices. Wheat had been resilient in the face of selling pressure in corn and soybeans recently, but wheat bulls today appeared to succumb to the recent down-trending corn and soybean markets. Today’s weekly USDA export sales report for the week ended Nov. 14 showed exporters sold 437,700 MT of U.S. wheat, up 29% from the prior four-week average, with unknown destinations the best buyer. Wheat prices had been rising this week on speculation China may be a better buyer of U.S. wheat. China has met with little enthusiasm for government sales of wheat that is as much as six years old. Shanghai JCI said yesterday that strengthening domestic price for wheat is surprising given reports of a good harvest this year. Food inflation in China is becoming a problem after pork prices already doubled this year. They don’t need bread prices firming up at the same time, so there is reason to watch for increased Chinese wheat interest. However, this week’s developments on the U.S.-China trade front do not appear to be positive.

Cotton: Cotton futures finished low-range with losses of 27 to 43 points through the December 2020 contract. Cotton traders failed to respond to strong weekly export sales that totaled 227,600 running bales for 2019-20 and 58,200 bales for 2020-21. Instead, uncertainties over U.S./China trade talks weighed on the market. There have been conflicting reports throughout the week on the trade front, but price action suggests traders are doubtful the two sides will reach a near-term agreement. December futures start their delivery process tomorrow. Liquidation of long positions ahead of the delivery process has weighed on the market recently. With March futures trading more than 3 cents above the December contract and full carry in other 2019-crop contracts, there isn’t interest in rolling those positions into deferred contracts.

HogsLean hog futures enjoyed corrective trade today, but the market was unable to maintain strong gains into the close. Futures settled mid- to low-range with gains of 25 to 82 ½ cents. News on the trade front was more positive today, with Chinese negotiators inviting U.S. officials to China for in-person trade talks. China’s top negotiator also made comments about being optimistic a Phase 1 trade deal will be reached. But sticking points over things like rolling back tariffs and Chinese purchases of U.S. farm goods remain. That tempered buying interest. The other major focal point today was USDA’s weekly export sales report. The department reported strong sales of 54,400 MT for 2019, with Japan and Mexico topping the list of buyers. A substantial amount of these sales were noted as “late reporting.” The department also reported an impressive 36,400 MT in sales for 2020 delivery, 34,300 MT of which were to China. Exports were also up a dramatic 81% from the four-week average at 59,800 MT, but again, a lot of that business qualified as late reporting.

Cattle: Cattle ended mixed and feeders retreated. December live cattle were up 2.5 cents at $119.325 and February futures fell 42.5 cents to $125.05.  January feeders were down $1.075 to $142.60. Futures are waiting for cash markets to catch up and reduce current large premiums. Sideways consolidation is long-term bullish and underscores the ongoing strong U.S. and global demand for beef. Beef prices have drifted lower and cash cattle are firming $1 to $2 this week, a normal occurrence around Thanksgiving. With the Tyson plant coming back online Dec. 2 and expecting to reach full capacity by early January, packer competition for cash cattle will be on the rise. The market is likely to remain quiet amid positioning ahead of Friday afternoon’s Cattle on Feed and Cold Storage Reports. USDA weekly beef export sales tally showed a 29% slowdown in sales from a week ago, while shipments surged 86% that included substantial late reporting to Japan, South Korea, Mexico, Hong Kong and Taiwan.

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