Ahead of the Open: Up on Trade Deal but Awaiting China Press Briefing This Morning to Confirm

Posted on 12/13/2019 7:57 AM

NEW ADVICE: Cotton producers: Sell order hit for 2019-crop sales… March cotton futures hit our standing order at 67.50 cents to sell another 10% of 2019-crop in the cash market. You should now have 65% of 2019-crop priced in the cash market. 

Grain Calls          

Corn: Up 3 to 5 cents
Soybeans: Up 8 to 13 cents
Wheat: Up 2 to 4 cents

GENERAL COMMENTS:  Soybeans rose to a three-week high, corn extended its rally away from three-month lows and wheat rose, but all three markets have slipped from the best levels overnight. The markets are supported after Washington set its terms for a trade deal with China, offering to suspend some tariffs on Chinese goods and cut others in exchange for Beijing buying more American farm goods. But Beijing has yet to confirm the deal. That means there are skeptics viewing the reported deal more as a final U.S. offer that as been approved by President Donald Trump and waiting for China to formally agree. There still is a lot to learn including a U.S. move today to halt threatened new tariffs on Dec. 15 and some confirmation from China. China's envoy to Washington, Cui Tiankai, could sign the deal today. The China Commerce Ministry to hold a briefing at 8:30 a.m. CT. We’ll see soon where the deal stands.

Sources briefed on the status of bilateral negotiations told Reuters that the United States would suspend tariffs on $160 billion in Chinese goods expected to go into effect on Sunday and roll back existing tariffs. In return, Beijing would agree to buy $50 billion in U.S. agricultural goods in 2020, double what it bought in 2017, before the trade conflict started. Neither Washington nor Beijing had made official statements, however, raising questions about whether the terms had been agreed by both sides.

New Chinese tariffs on U.S. goods are due to take effect at 0401 GMT Sunday and new U.S. tariffs on Chinese goods will apply at 0501 GMT. Both would need to make formal announcements to postpone or cancel these tariffs. People close to the deal told Bloomberg that the agreement still needs to be signed off by lawyers on both sides. This pact is unusual. But the wait for the lawyers is not. Every trade accord goes through what is known as a “legal scrub,” and that could still take weeks.

 The USDA’s daily export reporting service did not report any new large sales by private exporters this morning.

Corn: Futures found support yesterday on news of stronger export demand which has been faltering for more than a year. USDA announced private sales of 1.6 MMT of corn to Mexico, the fifth biggest one-day sale on record. That followed a positive USDA report for the week ended Dec. 5 that showed new sales beat market expectations. South Korea bought 60,000 MT of corn to be sources from any international source overnight.

SoybeansFutures touched a three-week high overnight with March futures back above the 100-day and 200-day moving averages waiting for the Chines press briefing this morning. The weather forecast for Brazil has not changed much in the 6- to 10-day outlook with moderate rainfall in most areas with lighter amounts in the northeast. The Argentine weather forecast over 10-day period is still dry in the southern regions of Argentina in the beginning part of the period but, looks to increase with rainfall for around 85% of the growing region by the end of next week.

Wheat: Futures are firm but still below key overhead resistance. Russia is looking for a new way to restrict grain exports at the level of the country's exportable surplus under "certain market conditions" to prevent sharp price movements, Agriculture Minister Dmitry Patrushev told the Kommersant newspaper. Russia issued a total ban on grain exports in 2010 and informal interventions in 2015. Researcher ProAgro cuts Ukraine’s 2019-20 grain crop forecasts 0.45% to 74.485 MMT earlier today.

Livestock Calls
Cattle: Steady-mixed
Hogs: Steady-mixed

Cattle: Futures are likely to be pushed and pulled in both directions today with cash cattle mostly steady to firm this week, but beef prices continue to push lower. Choice beef cutouts fell $3 and Select was down $1.15 amid another big week of slaughter and more sluggish wholesale beef trading. Rising market weights area may keep a lid on cattle futures. 

Hogs:  The market is expected to be quiet waiting for official China confirmation that a trade deal with U.S. is completed and will lead to additional Chinese tariff cuts on U.S. pork imports. The National average cash hog prices slipped 11 cents on Thursday, paring this week’s small gain. The pork markets were also lower on Thursday with the cutout sliding $1.53 as further gains in picnics were offset by losses in all other primal cuts. Slaughter this week is down 19,000 head from a week ago but still up 60,000 from a year ago.

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