After the Bell: Wheat Leads Corn, Soy Higher in Quiet Dealings; Livestock Surge

Posted on 03/20/2019 2:32 PM

Corn: Corn closed fractionally higher and in the upper half of the narrow range on Wednesday. May futures rose ¼ cent to close at $3.71 ½, while December rose ¼ cent to $3.95 ½. It was a quiet trade with few participants wanting to take on more risk amid uncertain U.S./China trade talks. Prices found underlying support from news on Tuesday that U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin plan to fly to Beijing next week to meet with Chinese Vice Premier Liu He.  Mr. Liu will pay a return trip to Washington, D.C., the following week. However, Bloomberg reports that some U.S. trade negotiators are growing concerned about China’s shifting stance on trade talks, according to people familiar with the situation. Chinese officials would like stronger assurances about the lifting of tariffs after the country agreed to change their intellectual-property policies. Today President Donald Trump said a trade deal with Beijing is coming along. But Trump said his administration is talking about leaving tariffs on China for a long period of time.  The weekly ethanol inventories rose to a record 24.4 million gallons even as production fell to just to the fifth lowest level in the past year. Focus on Thursday is two-fold: exports and weather. The weekly export sales report is expected to show 2018-19 new sales of 600,000 metric tons (MT) to 1 million metric tons (MMT) in the week ended March 14. That would be up from 372,000 MT a week earlier but down from 1.47 MMT a year ago.  New-crop sales may total less than 300,000 MT, down from a strong 474,600 MT a week earlier. The latest 30-day and 90-day weather outlook will also be released Thursday morning, providing further clues to the planting season and early summer growth.  

Soybeans: Soybean futures saw gains of just over a penny in the nearby contracts today, and finished near the daily highs. Meal saw slight gains of less than $1.00 and bean oil was 4 points higher in the two nearby contracts. Both the soybean bulls and bears now have China “trade-talk fatigue.” Yesterday, a Bloomberg report citing people familiar with U.S.-China trade negotiations said Beijing is pulling back on promises and pushing back on U.S. demands because "they haven't received assurances from the Trump administration that tariffs imposed on their exports would be lifted."  In comments to the press today, President Trump said the U.S. would not immediately lift trade tariffs on China if a trade deal is reached soon. The Wall Street Journal on Tuesday said Treasury Secretary Mnuchin and Trade Representative Lighthizer will be traveling to Beijing the week of March 25, and China's top negotiator would be coming to Washington a week later, with the goal of reaching an agreement by the end of April. A positive for the grain markets late today is the conclusion of the Federal Reserve’s Open Market Committee (FOMC) meeting that showed a surprisingly dovish Fed stance on U.S. monetary policy. The FOMC report lifted the stock market and sunk the U.S. dollar index. Further weakness in the greenback in the near term could work to push grain futures prices up by making U.S. grain prices more competitive on world markets. Soybean prices may move sideways ahead of the USDA Quarterly Grain Stocks and Prospective Plantings reports scheduled for March 29.

Wheat: Winter wheat futures posted gains of 6 to 8 cents and finished near session highs. Spring wheat futures ended mostly 4 to 5 cents higher and finished high-range, though off session highs. Wheat futures were supported by corrective buying, mostly in the form of fund short-covering today. Fundamental support came from flooding concerns across areas of winter wheat country and anticipated spring planting delays in spring wheat areas. While funds are willing to mildly cover short positions, they remain heavily short. It’s going to take a bullish catalyst to get funds to aggressively cover short positions. Unfortunately, export demand for U.S. wheat remains subdued. Traders are expecting modest weekly export sales tomorrow morning of 200,000 to 450,000 MT for 2018-19 and 100,000 to 225,000 MT for 2019-20. A bullish sales figure is likely needed to get funds to cover more shorts tomorrow.  

Cotton: Cotton futures prices ended the day down 15 points in the May and off 16 points in the July. Prices finished near mid-range. Cotton traders continue to be frustrated by a lack of clarity in the U.S./China trade talks, which does favor the bearish camp. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin plan to fly to Beijing next week to meet with Chinese Vice Premier Liu.  However, Bloomberg reports that some U.S. trade negotiators are growing concerned about China’s shifting stance on trade talks, according to people familiar with the situation. Chinese officials would like stronger assurances about the lifting of tariffs after the country agreed to change their intellectual-property policies. President Trump told reporters today the U.S. does not plan on lifting trade tariffs on China even if a trade deal is reached soon. His comments may have put some slight pressure on the cotton futures market late today. Cotton traders are awaiting Thursday morning’s weekly USDA export sales report. Any big buys from China would give the bulls some confidence that U.S. cotton sales on the world market are on the upswing.

Hogs: Lean hog futures pushed aggressively higher again today, with the April through July contracts settling up the $3.00 exchange daily maximum and deferred months not far behind. Futures hit new contract highs across the board today. Limits will expand to $4.50 on Thursday. The lean hog market’s dramatic march lower over the winter was in no small part driven by funds’ accumulation of a very large short position. Covering of that position has provided the fuel for much of the recent rally. Coming commitment of traders data will shed some light on how much potential there is for fresh buying going forward.  There is also plenty of fundamental reasons to be friendly the lean hog market. Tightening hog supplies in Asia as African swine fever spreads signals the potential for some pig U.S. pork exports to these areas that are heavily reliant on the meat going forward. Last week’s weekly sales update included a massive pork shipment to China. Traders will look for more big numbers in tomorrow’s update.

 Cattle:  April cattle futures rose 45 cents to $129.575, while June gained 55 cents to $123.375. Feeder cattle gained more than $1.50, touching the highest in five months. The Chinese African swine fever outbreak sending hog prices soaring the past two weeks is beginning to have carryover support in cattle futures. Hogs rose the $3 exchange limit today. The disease cannot be controlled, and it sounds like it has become a much more widespread problem than the official Chinese government has acknowledged. That can change the entire global meat trade as China imports more beef and poultry in addition to pork to meet consumer demand and prevent food inflation. Midday beef prices fell with Choice down 71 cents and Select down 96 cents. Sales were moderately active Wednesday after improving Tuesday when beef prices reached the highest since May. Traders are looking for steady to firmer cash markets this week after last week’s setback.  

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