Corn: Down 1 to 3
Soybeans: Down 1-3
Wheat: Up 2 to down 2 cents
General Comment: Grain and soybean markets are mixed to lower, slipping from overnight highs pending four to five weeks of additional talks to get the Phase 1 part of U.S.-China trade deal down on writing. Traders also curbing bullish enthusiasm about China spending $40 to $50 billion for farm goods from the United States with several technical and political hurdles remaining to be clarified or officially cut. Plus, Chinese officials are calling last week’s talks as making substantial progress not a new deal. The world's two largest economies have made progress in their trade dispute before without sealing a deal. In May, U.S. officials accused China of walking away from a sweeping agreement that was nearly finished over a refusal to make changes to Chinese laws that would have ensured its enforceability. The devil is in the details, and we don’t have many of those this morning after rallying Friday on reports of a deal. The Chinese have not confirmed that they will buy $40 to $50 billion of U.S. ag products, and there is considerable confusion as to the time frame for such a promise. Bloomberg says it is over two years, others just say it is indeterminate.
Underlying support remains the weather and potential crops losses. Freezing temperatures North Dakota to Missouri and western Illinois during the weekend and the blizzard in Canada and the Northern U.S. Plains damaged crops. The extent of the damage is not going to be fully understood for a while, but the situation will justify a market premium today. Warming mid- to late week this week will melt snow more aggressively, but cooling this weekend into next week will slow the snow melt once again
Argentina rainfall was heavier than expected Friday night and Saturday with nearly3 to 7 inches in some areas but much lighter amounts in southern and western parts of the country. Temperatures were very warm to hot in the central and north. More rain is expected this week, with southwestern Argentina expected to remain dry.
Brazil rainfall during the weekend was very limited and net drying occurred in most of the nation Temperatures were very warm with highest temperatures in the 80s and 90s and most lows in the 60s and 70s. Brazil rainfall through Friday will be most significant in southern parts of the nation while net drying occurs in most other areas. Some forecasts see much improved rainfall next week across center west, center south and some northeastern crop areas. Those rain are extremely important.
The Chinese government has not confirmed it will be buying record amounts of U.S. ag products or the details of Phase 1 Deal. This leaves doubt as to what was verbally agreed to during last week’s talks. President Trump hopes to sign the Phase 1 deal with Chinese President Xi at the Asia-Pacific Economic Cooperation meeting on Nov. 11-17 in Santiago, Chile, but the negotiations may stretch out into mid-December, when the next round of U.S. tariffs are set to be enacted. The paperless U.S.-China trade deal will underpin CBOT futures on sharp breaks, but consumers see no reason to chase rallies amid the political uncertainty. Morgan Stanley says President Donald Trump’s partial trade deal with China is an “uncertain” arrangement at best and there does not appear to be viable path to reduce existing tariffs at the moment. The U.S. agreed to suspend a tariff increase on at least $250 billion in Chinese goods to 30% from 25% set for Tuesday, but a tariff hike implemented in September was not rolled back and plans for another hike just before the Christmas holiday on Dec. 15 remain in place. Without a durable dispute settlement mechanism in place, another round of tariff increases cannot be ruled out, according to Morgan Stanley.
A slide in China's exports picked up pace in September while imports contracted for a fifth straight month, pointing to further weakness in the economy and underlining the need for more stimulus as the Sino-U.S. trade war drags on. It could take time for Chinese exports to recover amid slowing global growth despite tentative signs of a thaw in tense trade relations between the world's top two economies. September exports fell 3.2% from a year earlier, the biggest fall since February, customs data showed on Monday. Analysts had expected a 3% decline after August's 1% drop. Total September imports fell 8.5% after August's 5.6% decline, the lowest since May, and were expected to fall 5.2%.
Friday’s CFTC Commitments of Traders report showed that funds are net short about 19,000 SRW wheat (down 2,000) and 91,000 contracts of corn (down 35,000) while holding net-long 6,500 contracts of soybeans (up 15,000). Funds were holding a larger short position than expected.
USDA is closed Monday for the Columbus Day holiday and markets are open.
Corn: December corn opened above $4.00 and the 200-day moving average and retreated overnight. The market surged on Friday to a 2-month high on weather and reports of a tentative U.S.-China trade deal. A lack of details or plans for more talk to complete an actual written deal have capped the rally with some drier weather this week likely to aid harvesting of U.S. corn.
Soybeans: November soybeans gapped to near a four-month high last night but valued to old the rally. Prices are in retreat on uncertainty when China might begin new purchases of U.S. soybeans and improving weather forecasts for U.S. and South American crops.
Wheat: The grain is holding some of its overnight gains but are well below the session highs. The market is largely building on last week’s strong close. Weather in Europe will remain a little dry from southeastern Europe through Ukraine to Kazakhstan, but France moisture will improve for its winter crops. Rain is needed in southern Russia, Ukraine and Kazakhstan for better winter crop establishment. However, some improvement has already occurred recently in eastern Ukraine and Russia’s Southern Region.
Cattle: Futures seen supported by ideas packers will need to pay more to acquire supplies this week. The cash live cattle trade last week was extremely light. Boxed beef cutout values were higher last week with Choice extending gains 3 cents on Friday to $215.66 per cwt. up from $211.96 a week earlier while Select tors to $188.68 from $186.92 a week earlier. The reported boxed beef trade for the week was 433 loads, 8.1% lower than a week earlier.
Hogs: The market may open higher but worries about when China will buy more U.S. pork and ship recent large purchases will cap rallies. Hog slaughter for the week was estimated at 2.725 Mil head, 9% more than a year ago, and will be the 2nd largest weekly slaughter rate on record. Carcass weights are on the rise amid cooler autumn temperatures but are unchanged from a year ago at 210 Lbs. Despite historical production rates, the pork cutout at $77 is nearly unchanged from 2018. Once again, strong domestic demand looks to be developing in the 4th quarter as U.S. end-users are concerned for Chinese demand in the year ahead. This is supporting the pork market and holding estimated slaughter margins at the highest level of the year. China's pig herd in September was 41.1% smaller than it was a year earlier, the agriculture ministry said on Monday, as a year-long African swine fever epidemic continued to slash the world's largest herd. The number of sows in China also fell by 38.9% in September, after the deadly disease spread to every province in the country. Rabobank estimates that the herd has already declined by 50% and could fall by 55% by the end of the year.