Ahead of the Open: China Makes Concessions to Ramp Up Trade Negotiations to Ease Tensions

Posted on 11/15/2018 7:34 AM

Grain Calls

Corn: up 2 to 3 cents
Soybeans: Up 6 to 10 cents
Wheat: Up 3 to 6 cents

General Comment: Global stocks are rising and ag commodities are in the green after Chinese officials outlined a series of concessions they are willing to make to the U.S. ahead of meeting between the two countries’ leaders at the G-20 in Argentina. While the written commitments fall short of the major structural reforms demanded by the White House, talks are said to be constructive, according to Bloomberg News citing three sources. Senior Chinese and U.S. officials are “maintaining close contact” following a phone call last week between the country's two leaders, China’s Ministry of Commerce said today. Larry Kudlow, the head of President Donald Trump’s National Economic Council said earlier this week that China and the U.S. are in touch “at all levels” over trade. Presidents Trump and Xi are scheduled to meet at the Group of 20 summit at the end of the month in Argentina where a “framework” for a trade truce could be completed. At least that’s the spin on the situation today.

Corn is expected to reopen higher on positive U.S./China trade talks and underlying technical support. December is moving up way from the 40-day and 100-day moving average tested the past two sessions. Consultancy Strategie Grains increased its estimate for this year's grain maize harvest in the European Union for the second consecutive month on Thursday and now expects it to be larger than last year's crop.  

Soybean prices seen higher in cautious trading. Prices are already off the day’s best levels after wire services reported China had submitted written concessions to the U.S., making it very difficult to want to short the market. Also, in the background are the U.S. harvest delays and expectations for a smaller U.S. crop. Still, world supplies are record large and that keep a lid on rallies.  Singapore-based Wilmar International Ltd may invest in soybean production and processing and transhipment of soybean concentrates in Russia's Far East, a regional ministry said on Thursday.

Wheat prices seen rising on tightening global supplies in exporting nations as Russia is getting closer to exhausting its exportable surplus. According to Gary McGuigan, president of global trade are Archer Daniels Midland today there is going to be a squeeze on milling-quality wheat in the second half of the marketing year and that will boost demand for U.S. supplies, Reuters reported.  Russia’s 2018 grain crop now is likely to reach 110 MMT, according to the country’s ag minister, up 1 MMT from his prior estimate. Despite the bigger crop estimate, he still expects the country to export between 38 MMT and 39 MMT of grain (mostly wheat) in 2018-19. Strategie Grains said today that the outlook is much better for the 2019 harvest after much-needed rains arrived across western and northern parts of the EU, giving farmers the opportunity to plant significantly more wheat than last year. However, the consultant warned that conditions remain very dry in the southeast EU countries.

Livestock Calls

Cattle: Weak
Hogs: Weak

Cattle futures seen on the defensive to begin trading after erasing early gains on Wednesday and closing lower. After failing Wednesday to confirm the reversal low set a day earlier, the bulls are on notice to secure a high-range weekly close on Friday. Boxed beef cutout values fell again on Wednesday with Choice down 92 cents and Select off $1.80, both the lowest since at least Oct. 25. Cash cattle bids expected down $1 to $2 this week. However, wholesale beef sales were very good. U.S. beef exports would benefit from a U.S./China trade accord.

Hog futures are expected lower following another drop in average U.S. cash hog prices Wednesday as wholesale pork carcass prices fell $1.67 cents to $69.02, the lowest for this time of the year since before 2013. Supplies of market-ready hogs remain at record levels. The good news is wholesale pork demand is improving at the lower prices. Market should find support from positive news on the U.S./China trade front. The Chinese government acknowledged today that the country is in a "very serious" situation, with outbreaks of swine fever in several provinces, which have already resulted in the slaughter of hundreds of thousands of infected pigs.

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