After the Bell: Small Gains in Corn, Soy on Reduced China Trade Tensions, Smaller Crops

Posted on 08/26/2019 2:48 PM

Corn: December corn futures closed up 1/2 cent at $3.68 1/4 today. The corn futures market saw some light short covering today after President Trump said China called U.S. trade officials overnight about trade talks. However, as evidenced by today’s very tepid price gains, grain traders remain skeptical amid the mercurial rhetoric coming from both sides. News of a tentative U.S./Japan trade deal also provided some light support to corn, but more details and actual increased purchases are needed to support the market.  Corn prices also rose on lower U.S. crop forecasts. We are forecasting a national corn yield at 163.3 bushels per acre and soybean yields at 46.1 bushels, both well under USDA’s estimates earlier this month. August is set to end on a cool note, further slowing crop maturity. Near to slightly below normal rainfall and below normal temperatures will prevail for the next 10 days. The chill will further slow U.S. summer row crop maturation and raise crop quality and quantity concern with even normal freeze dates in October. Monday’s USDA crop progress report is expected to show corn and soy crops that are falling even further behind in maturity.

Soybeans: Futures opened lower and rallied, with meal firmer and oil slightly lower on spread trading. November soybeans rose 10 ¾ cents to $8.67 ¼.  Soybean futures rose on Monday on hopes that Washington and Beijing will dial down tensions over trade. Traders grew hopeful again that China and the United States could move toward a trade agreement as U.S. President Donald Trump said he was confident that Beijing was sincere about wanting a deal. China's lead negotiator in the trade talks said Beijing was willing to resolve the trade war with the United States through "calm negotiations" and resolutely opposed the escalation of the conflict. The trade war between the world's two largest economies heated up on Friday as both sides levelled more tariffs on each other's exports. But China's soybean imports in July rose nearly three-fold from a year earlier, after the arrival of cargoes booked by Chinese state firms during a bilateral truce in December. China imported 911,888 metric tons (MT) of U.S. soybeans, up from last year's 308,127 MT and up 48.3% from 614,805 MT in June. Palm oil prices jumped to a six-month high on rising demand and prices in China for vegetable oils.  China nearly tripled global soybean oil imports in July from a year earlier and boosted palm oil imports 74%. China continues to buy Brazil and Argentina supplies for fall delivery, avoiding new-crop U.S. soy.  

Wheat:  Wheat futures closed lower, erasing earlier gains. December SRW wheat was down 2 ½ cents at $4.75 ¼ with HRW wheat down about 2 ½ cents and spring wheat futures falling 2 to 6 cents. It was a quiet trade on both sides of unchanged today with little fresh news to push prices in either direction. SRW spreads continue to tighten amid shrinking supplies of high-quality wheat. HRW cash markets remain weak amid limited export demand. Spring wheat harvest may be delayed by recent rains. Quality is good and that is a plus for helping to put in a bottom. Russia exported 1.2 million metric tons of wheat last week, with the season total since July 1st now at 6.3 MMT, down 7% from last year. The Russian wheat harvest is said to be 53% done by area, but 77% done by volume. U.S. export inspections came in at 492,900 metric tons, or 18.1 million bushels. To stay on target with the USDA export forecast for the year, weekly inspections need to average about 19 million bushels to the end of the season. Australia already has written off their prime hard red wheat to drought, and Argentina is dry in a few of the wheat areas, but in general, there is as little interest in those crops with world supplies burdensome.

 Cotton:  December cotton futures closed down 39 points at 57.82 cents today but near the session high after hitting a new contract low in overnight trading. The U.S. and China sought to ease trade war tensions Monday, with Beijing calling for calm and U.S. President Trump predicting a deal after markets fell in response to new tariffs from both countries last week. This news helped to lift cotton futures up from their overnight lows after they spiked down amid world stock markets that were selling off to start their trading sessions—until turning around when the news of the positive U.S.-China overtures surfaced on the wires. While the cotton futures market may still see prices drift lower in the near term, U.S. farmers are going to be tight-fisted holders of their crop at present cash price levels. Still, for a rally to be sustained in cotton futures, U.S. exports need to improve.

Hogs: Hogs closed sharply higher to up the expanded $4.50 limit, erasing Friday’s steep drop. Prices rose on renewed hopes for some progress on China trade talks and forecasts for dramatic Chinese import needs. A tentative deal with Japan added to optimism today in the hog market. President Trump indicated earlier today on the sidelines of the Group of Seven meetings that China will come back to the negotiation table and that China wants to make a deal. U.S. farmers can only hope that he is right in his expectations after the recent roller coaster threats and counter threats. China’s only comment comes from Vice Premier Lui He, who said that China is seeking a calm end to the trade war. There was no suggestion that China has changed its hardline negotiation position, just that both sides wanted a fair and balanced deal. Traders will be watching to see confirming media reports from China that they are willing to come to Washington and restart delayed trade talks. Chinese pork meat imports are projected to rise from 2.1 MMT in 2018 to 3.3 MMT in 2019 and 4.2 MMT in 2020, due to the African swine fever (ASF) outbreak, consultancy INTL FCStone said on Monday. It expects the Asian nation to take up to seven years to return to production levels near the 50 MMT per year.

Cattle: October live cattle futures closed up $1.60 at $101.00. December live cattle gained $1.675 at $105.975. November feeder cattle futures closed up $1.725 at $134.025. The cattle markets good a bullish boost today on news of the tentative U.S.-Japan trade deal, which would increase U.S. beef exports. The cattle futures market is finding buying support from strong packer demand and near record profit margins. The noon beef report today showed Choice grade up $1.58 and Select up 7 cents. The spread between the two grades widened to $26.32, which is historically high and suggesting very current marketings. With packers making good money, downside will be limited in cash cattle market for at least the near term. Friday afternoon’s August Cattle on Feed report was viewed as neutral to slightly supportive. The herd rose 0.2% from a year ago, which is less than the 0.8% gain expected by traders polled by Reuters. The smaller gain was the result of feedlots buying 2.1% less replacements, below the 0.1% increase expected by traders. The report did confirm the fifth consecutive month of record-large on-feed supplies.  

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