After the Bell: U.S./China Trade Optimism, Russian/Ukraine Tensions Lift Grains

Posted on 11/30/2018 2:40 PM

Corn:  Corn prices closed up 3 1/2 to 5 3/4 cents today and nearer their session highs. December corn led the gains. Prices also closed at technically bullish weekly high closes today. For the week, December corn futures gained 7 cents. The  corn market late this week was supported by some optimism the U.S. and China will this weekend come to some type of agreement to ease the trade war currently in progress. Look for more active trade in the grain markets on Monday morning, as the marketplace still really does not know what the outcome of the U.S.-China trade talks will be. The market also saw buying interest late this week from the strong weekly export sales report on Thursday, when USDA said 1.267 MMT of corn were sold last week--up 44% from the prior week and 77% higher the average the past four weeks. That's a strong sign that global demand is improving after several weeks of disappointing business.   

Soybeans: We advise hedgers and cash-only marketers to sell another 10% of 2018-crop to get to 35% priced in the cash market. Soybean futures prices closed nearer their daily highs and up 5 1/2 to 6 cents in the nearby contracts today. Prices also closed at technically bullish weekly and monthly high closes. For the week, January soybeans gained 12 1/2 cents. The soybean market late this week was supported by optimism the U.S. and China will this weekend come to some type of positive agreement to ease the serious trade tensions. Look for more active trade in the soybean market Monday morning, as the marketplace does not know what the outcome of the U.S.-China trade talks will be. Price rose today after U.S. Trade Representative Robert Lighthizer said this morning that he would be surprised if Saturday's dinner between presidents Trump and Xi "wasn't a success." That sounds like some type of framework has been completed.

Wheat:  Wheat prices were higher to sharply higher, closing near session highs, erasing part of their November losses. March SRW futures gained 7 ¾ cents to close at $5.15 ½, just ½ cent lower for the month. March HRW futures rose 7 ¾ cents to $5.00 ¼ on Friday while closing down 17 ¾ cents in November. Wheat prices jumped higher Friday on rising tensions between Russia and Ukraine. Foreign ministers from the Group of Seven leading industrialized nations on Friday expressed their "utmost concern" about Russia seizures of three Ukrainian naval ships and their crews near Crimea. In a statement, the ministers called for restraint and said there was no justification for the move. They also urged Russia to release the three Ukraine ships and crew taken off Crimea last weekend. Ukraine on Friday banned Russian men of combat age from entering the country. President Trump called off a meeting with Russian President Putin in Argentina. To boost Ukraine, the EU released 500 million euros in financial assistance. Russia’s seizure and subsequent annexation of Crimea in 2014 led to widespread global sanctions on Russia and more than a $1 rally in wheat prices.

Cotton:  Futures rallied this week to end higher for November. March futures rose 23 points to close at 78.91 cents on Friday. Price rose 61 points in November, the second straight monthly gain and suggesting a seasonal low formed in October at 76.50. Prices were supported this week from optimism that presidents Trump and Xi will call a cease-fire in their trade war during meetings this weekend in Argentina. Outcome of those talks will impact trading next week. The market may find some support next week from indications the U.S. Fed is close to ending its interest rate hikes. That would help to pressure the dollar, boost global economic activity and boost export demand for U.S. cotton after a recent slowdown in new business.

Hogs:  December lean hog futures closed down 92 1/2 cents and finished in the middle of the week’s trading range. February hogs ended up 12 1/2 cents, nearer the daily high and closed at a bullish weekly high close. For the week, February hogs lost 60 cents from last Friday’s close. Today’s trading action that produced a bullish weekly high close sets the stage for some follow-through buying on Monday. However, slaughter this week estimated up 39,000 head from the same time last year, a reminder of that pork supplies are rising. Still, the weekend U.S.-China trade talks and the outcome will be a heavy influence on hog futures trading early next week. Record hog supplies continue to move through the pipeline, with strong domestic consumer buying and record exports. Cash hogs normally bottom in late November and began to firm last week. Despite a trade dispute with the U.S., China may continue to buy pork for its state reserves to support farmers struggling amid the African swine fever outbreak, in order to ensure adequate production.

Cattle:  Live cattle rose on Friday to pare monthly losses. February cattle rose 22.5 cents to close at $120.50. That was down $1.70 in November. January feeder cattle futures fell 75 cents to close at $145.22 and down $4.90 in November. In addition to the outcome of the meeting between presidents Trump and Xi on Saturday, the market will be closely watching the winter storm this weekend across the Plains and Midwest. Cash cattle were steady to firm this week as packers lined up supplies. Still some plants may be closed on Saturday and that means it will be tough to make up the lost production. That may put some pressure on cash trade next week but lift the wholesale beef markets. Beef was higher at midday on Friday with Choice up 18 cents and Select gaining 11 cents. Sales were modest after active trade the past three sessions. The relative weakness in feeder cattle to live cattle is a negative signal.


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