Ahead of the Open: Soybeans Lead Rally as China May Buy More to Get a Interim Trade Deal

Posted on 10/09/2019 8:08 AM

ADVICE ALERT:  Our standing order at $9.30 in November soybeans was hit this morning to sell another 10% of the 2019-crop soybeans in the cash market.  Make sure you are current with advice.

Grain Calls

Corn: Steady to up 1 cent
Soybeans: Up 7 to 10 cents
Wheat: Steady to up 2 cents

General Comment:  Soybeans leading the rally today after reports indicated China is willing to buy more soybeans and other agricultural products to seal an interim deal in exchange for the U.S. delaying another increase in tariffs next week.  Corn and wheat are following but cautiously grinding higher after rising to overhead resistance and ahead of Thursday’s USDA monthly World Supply & Demand Report.  The markets also are finding support from the cold, snow and rain forecasts for starting late tonight into Saturday for the northern Midwest and Canadian Prairies. Some forecasts suggest a small band of more than 30 inches of snow from North Dakota into Canada with 8 to 16 inches of snow for much of central South Dakota north into the Prairies.

Chinese officials are offering to increase purchases of US agricultural products as they seek an interim agreement between Beijing and Washington that will stave off a new round of tariff hikes on October 15, according to people briefed on the two countries’ ongoing negotiations, according to the Financial Times (FT). “Liu He is coming with real offers, it’s not an empty visit,” said one of the people briefed on the talks. They want to “reset” the troubled talks ahead of a potential November meeting between President Donald Trump and his Chinese counterpart, Xi Jinping, at the annual summit of Asia Pacific Economic Conference leaders in Chile in mid-November. Liu’s team is offering to boost annual purchases of soybeans to 30 million metric tons (MMT) compared with 20 MMT at present. China would also make a raft of changes to non-tariff barriers that have long frustrated the USDA and American farmers. “China has fundamentally agreed to all of the USDA’s demands on beef, pork and lamb,” a second person told the FT. “They’ve got about 60 internal changes to their [import] process that they’ve agreed to.” “They’re taking great note of how [Trump’s] new Japan [trade] deal . . . led with agriculture and they are pushing in that same direction,” the person reportedly said.

Still, an editorial published in Chinese and English in the China Communist Party-run Global Times newspaper emphasized the low expectations for a trade agreement at talks starting tomorrow in Washington. Events of the last few days support growing mistrust, with the U.S. blacklisting Chinese tech companies, discussing investment restrictions and banning travel by some of the country’s officials.  

USDA in its daily export sales reporting service said private exporters did not report any new large sales in the past 24 hours this morning. That may be a little negative for soybeans after talk China was shopping for some additional quantities earlier this week.  

 

Corn: Futures opened firm slightly weaker overnight and have been firming this morning with the adverse weather and China buying report. Prices are just below key resistance.

SoybeansNovember soybeans rose to the highest since July 15 this morning on hopes for increased Chinese soybean purchases. 

Wheat: The grain is building on recent increased global tenders and rising world prices. Egypt's state grain buyer bought 180,000 MT of Russian wheat and 115,000 MT of Ukrainian wheat at a tender on Tuesday. 

Livestock Calls

Cattle: Steady to firm
Hogs: Firmer

Cattle: Futures seen firmer on the strength in beef trade on Tuesday. Choice cutout rose $2.51 and Select gained $1.15 on light to moderate sales. Beef is making a seasonal low that about $9 higher than a year ago—a bullish sign. The market is looking for another gain in cash cattle this week with little action reported the first two days of the week.  USDA estimated dressed weights last week rose 3 lbs. from a week earlier to 821 lbs. but remain 10 lbs. below a year

Hogs: Look firmer to start after the strong reversal up on the charts on Tuesday and China pledging to buying $10 billion more in U.S. ag products that would likely include pork. The national average cash hog prices jumped $2.28 on Tuesday. Wholesale pork cutout values fell 30 cents, but sales were active at more than 438 loads, the most in three weeks. Slaughter is down 6,000 head from a week ago but still up 48,000 head from a year ago. South Korea has reported another suspected case of African swine fever on a farm in Yeoncheon, which is located north of Seoul. This would break a five-day streak without any new cases.

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