After the Bell: Soybean Jump on Signs of a China Trade Deal; Grains Slump on Poor Exports

Posted on 11/07/2019 3:19 PM

Corn:  December corn futures closed down 2 1/2 cents at $3.75 1/4 today and hit a five-week low. March corn futures lost 4 cents to $3.83 3/4, also hitting a five-week low. Slack export demand for U.S. corn continues to press the futures market lower. Thursday morning’s weekly USDA export sales report for the week ended Oct. 31 showed corn sales totaled 487,900 MT, up 15% from the prior four-week average but down 11% from a week ago. Total shipments and outstanding sales are now 47% behind a year ago. The near-term technical posture for the corn market has deteriorated recently as prices have been trending lower for three weeks. That’s inviting some fresh chart-based selling pressure in corn futures. Recent selling pressure in corn futures has prompted notions USDA may not trim its crop forecast as much as expected Friday. Also, any cut in production may be offset by another reduction in U.S. exports, leaving ending socks little changed. Traders surveyed by Reuters expect the U.S. corn yield to fall to 167.5 bu. per acre on average from last month’s USDA forecast of 168.4 bu. per acre. The Doane/Pro Farmer estimate is 166.8 bu. per acre. The corn market today saw no benefit from spillover support from soybean futures that rallied in the face of U.S.-China trade negotiations that appeared to take a big step toward at least a partial agreement. Both sides today announced a scaling back of trade tariffs.

Soybeans: Soybean futures finished 5 to 10 cents higher today. January soybeans closed up 9 cents at $9.36 1/2. Meal futures firmed $5 to $6.70. Soyoil dropped 31 to 32 points. Soybean futures were supported by positive news on the U.S./China trade front. China and the U.S. have agreed to roll back tariffs as part of the first phase of a trade deal, officials from both sides said. That gives traders more optimism the initial portion of the trade deal will be signed before the end of the year. Additional support came from strong weekly export sales. For the week ended Oct. 31, USDA reported soybean sales of just over 1.8 MMT. Traders were expecting 1.2 MMT of sales, at most. China was the lead buyer at 956,300 MT. In addition, USDA announced daily sales of 136,000 MT of soybeans to China. Daily soymeal sales of 133,000 MT of soymeal to the Philippines were also announced. Tomorrow’s trade will be guided by USDA’s November crop reports. Traders expect the soybean crop to come in 40 million bu. lower than last month and 2019-20 ending stocks to drop 32 million bushels.  

Wheat: Wheat futures closed generally 3 to 5 cents lower. That was low-range in SRW and HRS contracts and mid-range in HRW contracts. Wheat futures were pressured by disappointing weekly export sales. For the week ended Oct. 31, USDA reported sales of 360,600 MT, which was at the low end of pre-report expectations. HRS sales were decent at 118,800 MT, but SRW and HRW sales were poor at only 10,900 MT and 90,600 MT, respectively. While the export pace is stronger than year-ago, the demand side of the market is far from bullish, as most foreign prices are still cheaper than U.S. wheat. Global crop concerns, especially in Australia and Argentina continue to provide underlying support, though that’s largely factored into the market. Wheat is either going to need a sustained increase in export demand or additional global wheat production concerns to fuel a fresh wave of buying. USDA’s November crop reports will feature an update on spring wheat harvested acreage and production after the agency did a special survey on both due to poor fall weather conditions and the delayed harvest. Traders expect both to be reduced but are only looking for a 9-million-bu. reduction in 2019-20 ending stocks.

Cotton:  Futures closed higher but near midrange. December rose 66 points to 64.35 cents. Prices gave back some of their early gains tied to Chinese reports that U.S. and Chinese negotiators had reached a deal on Phase 1 of de-escalating trade tensions. However, some reports say not everyone in the White House is on board with the deal that would require a roll back of tariffs. Also, no venue or timetable have been announced for a possible signing of a deal. The United States and China have agreed to roll back tariffs as part of the first phase of a trade deal between the world's two biggest economies, said a U.S. official, confirming a Chinese Commerce Ministry announcement earlier Thursday.  Ag traders still want to see details of the Phase 1 deal. Both sides must simultaneously scrap some tariffs, including reversing U.S. pledge for new tariffs on $156 billion of Chinese goods set for Dec. 15. Tomorrow is report day and traders are looking for minor changes in both U.S. and world supply and demand forecast updates from USDA. That creates the potential for surprises.

Hogs:  Futures ended mixed with December lower and the rest of the contracts all higher. December fell 47.5 cents to $64.30 as February rose $1 to $73.775. Most contracts rebounded on speculation China will soon cut pork import tariffs and boost U.S. purchases. The United States and China have agreed to roll back tariffs as part of the first phase of a trade deal between the world's two biggest economies, with a U.S. official confirming a Chinese Commerce Ministry announcement earlier Thursday. Ag traders still want to see details of the Phase 1 deal and when it is signed. A Chinese Ministry of Commerce spokesman said earlier that both sides in the trade dispute have agreed to roll back tariffs in phases as they work toward a deal. Both sides must simultaneously scrap some tariffs, including reversing U.S. pledge for new tariffs on $156 billion of Chinese goods set for Dec. 15. Comments follow "serious and constructive" discussions. In what could be another gesture to boost optimism, China's state news agency Xinhua reported late on Thursday that the Chinese customs and the Ministry of Agriculture are considering removing restrictions on U.S. poultry imports in place since January 2015.

Cattle:  December live cattle futures closed steady and near mid-range at $119.00. January feeder cattle futures gained $1.35 at $145.775. Live cattle futures saw some normal chart consolidation today after recent strong gains that pushed prices to more-than-five-month highs earlier this week. Ideas of higher cash cattle prices yet this week are providing limited support since futures are trading above cash bids. So far this week there has just been a very light test in Iowa and Nebraska at prices ranging from $113 to $114--steady with week-ago action in Iowa and down $1 to $2 in Nebraska. Choice and Select boxed beef values climbed $0.51 and $1.34, respectively, today amid moderate movement of 61 loads. USDA today reported 10,100 MT of beef were sold for export in the week ended Oct. 31, down 36% from a week earlier. Shipments were up 9% from a week earlier with Japan and South Korea the top destinations. No new business was reported with China.

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