After the Bell: Wheat Leads Lower Amid Slow Exports, China Trade Uncertainty

Posted on 03/06/2019 2:34 PM

Corn: Corn futures closed down 4 cents in the nearby contracts and near daily lows.  Corn market bulls are frustrated after three days of waiting for some new clues on the U.S./China trade talks, and a bit nervous ahead of Friday’s USDA monthly supply and demand report. Bloomberg News reported today President Donald Trump is pressuring U.S. trade negotiators to cut a deal with China soon in hopes of fueling a market rally, as he grows increasingly concerned that the lack of an agreement could drag down the stock market. On another downbeat assessment of the U.S.-China trade progress, Gregg Doud, the chief U.S. agricultural negotiator at the U.S. trade representative's office, said Tuesday it was unclear whether the U.S. and China would be able to reach an agreement to end the trade war, despite recent reports a deal was close. Ethanol production fell 4,000 barrels per day (BPD) to 1.02 million BPD, while stockpiles rose 552,000 barrels to 24.26 million barrels. Lower production and higher inventories are another negative factor for the corn market at mid-week.

Soybeans: Soybean futures closed lower and near session lows and below swing-low support. May futures fell 11 3/4 cents to $9.02. Soybean meal futures closed down more than $3.50 and soybean oil futures were down about 25 points, both closing near their session lows. Traders are growing pessimistic that a trade deal will get done or will not deliver the Chinese purchases needed to catch up on lost sales since the trade war began eight months ago.  Gregg Doud, chief U.S. agricultural negotiator at the U.S. trade representative's office, said Tuesday it was unclear whether the U.S. and China would be able to reach an agreement to end the trade war, despite recent reports a deal was close.  “The talks are going well,” Ted McKinney, Undersecretary for Trade and Foreign Agriculture Services told a press call on Wednesday. “Right now, I think there's just a lot of work in getting words down ... a contract or agreement, and that’s the current status,” he added. The USDA flash sale system has included a little corn, but no soybean sales yet this week. About 12 days ago, USDA Secretary Sonny Perdue announced that China had agreed to quickly purchase another 10 million metric tons (MMT) of soybeans in response to positive progress on trade talks.

Wheat: Winter wheat futures finished mostly 10 3/4 to 13 3/4 cents lower and near session lows. Spring wheat futures ended mostly 2 to 3 cents lower and midrange. Wheat futures were slammed by a lack of supportive news and technical-based selling. Fundamental pressure came from export demand concerns as the U.S. is struggling to uncover foreign buying despite falling prices. That signals the market must go lower to attract more demand. Gregg Doud, chief U.S. agricultural negotiator at the U.S. Trade Representative's office, said Tuesday it was unclear whether the U.S. and China would be able to reach an agreement to end the trade war, despite recent reports a deal was close. Doud’s comments spooked traders today. While China hasn’t been a big buyer of U.S. wheat in the past, there were reports back in January that it would buy as much as 7 MMT of U.S. wheat. Traders have grown tired of waiting on those purchases. Traders are expecting USDA to report export sales between 200,000 MT and 500,000 MT for the week ended Feb. 28.

Cotton: Cotton futures favored the downside today and the market ultimately settled mid- to low-range and down 16 to 40 points. May cotton futures saw a mix of followthrough buying and profit-taking following Tuesday’s move to the upside, but in the end the market finished little changed on the day. Nearby contracts were able to settle above the 40-day moving average for the second day in a row, which was encouraging. Traders favored the downside today as a top trade official made comments indicating a trade deal with China and big commodity buys from Beijing were far less of a certainty than various reports signaled earlier in the week. Traders are also working to even positions for USDA’s weekly export sales update tomorrow and the department’s monthly balance sheet update on Friday. Export sales were solid over the latest reporting period and traders are hopeful recent low prices will lead to another strong showing in this week’s report. The market expects USDA’s S&D report to show a modest 120,000-bale increase in ending stocks versus February to 4.42 million bales.  

Hogs:  Futures closed lower and near midrange, with April down 82.5 cents to settle at $57.075. June hogs held inside of Tuesday’s range, finishing down 60 cents at $75.75.  The market gave back some of its recent hard-won gains as the premium to the CME cash index expanded to more than $6 yesterday, encouraging some light selling. At midday, wholesale pork carcass values inched down 6 cents on moderate sales after big sales Tuesday. Traders are also cautious about taking on new long positions amid large slaughter levels and Thursday’s USDA January Cold Storage Report and weekly export sales update. Slaughter the first three days of this week is estimated at 1.42 million head, up 5% from a year ago. However, marketings remain current as average weights in Iowa/Minnesota last week fell to 285.1 lbs., down from 286.4 lbs. a year ago. The USDA announced today that to prevent the entry of African swine fever into the U.S the agency plans to work with Customs and Border Patrol agents to add 60 beagle teams to the existing 119 teams to monitor U.S. commercial ports, seaports and airports.  

Cattle:  Live cattle futures closed steady in the April contract and down 20 cents in the June, on mild profit taking from recent gains that last week pushed futures to contract highs. April feeder cattle futures closed down 70 cents and hit a six-week low today. Futures traders are waiting for more cash trade to develop this week and that will likely have to wait until Friday. Some light sales took place in the Iowa/Minnesota market at $127 on Tuesday--down $1.00 from the low end of sales last week in the state and under some early sales Monday at $128.50. Feedlots continuing to seek higher prices given rising boxed beef prices, cold temps in cattle country and strong packer profit margins. Active cash cattle trade could hold off until after the release of the USDA Cattle on Feed Report Friday afternoon. A bullish report could find packers bidding $130.00 for cattle. USDA will release its monthly Cold Storage report Thursday. Today's midday beef report showed Choice grade up 83 cents and at the highest level since early last summer. Select grade gained 74 cents. Movement was 63 loads.

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