Ahead of the Open: Waiting for a Firm Date for a U.S./China Deal Ceremony

Posted on 03/12/2019 7:25 AM

Grain Calls

Corn: Mixed-firm

Soybeans: Mixed-firm

Wheat: Up 2 to 3 cents

General Comment:  Grain traders are aware that managed money is sitting on a sizeable short, but a fundamental or technical spark is needed for a rally. A U.S./China trade deal is needed to ignite a bull. The Chinese Parliament is meeting this week and any news on a US/China Trade Summit more likely later this week or next week.

U.S. and Chinese trade representatives held further talks over critical issues in a phone call overnight, with China’s state-run Xinhua News Agency reporting that arrangements were agreed for the next stage of negotiations. Chinese officials remain wary of President Donald Trump’s request for Xi Jinping to fly to the U.S. to finalize the deal as they fear Xi may be embarrassed by an unpredictable Trump or forced into a last-minute concession. White House spokeswoman Sarah Huckabee Sanders said that a date still hasn’t been set for the meeting. Thus, the agreement will be completed in full before Trump and Xi meet for a photo opt at their Trade Summit. This makes the announcement of the Trade Summit more important than the actual pact signing ceremony.

The dollar fell on Tuesday after an apparent breakthrough in Brexit negotiations between the European Union and Britain encouraged buying of riskier currencies. The dollar weakness and stronger stocks and crude oil prices will provide underlying support to the grain markets. 
USDA’s daily export sales reporting services said no large sales were reported in the past 24 hours, a small disappointment with some looking for additional sales to China. ON Monday, USDA announced 926,000 metric tons (MT) of soybeans sold to China and 664,000 MT were announced sold to China on Friday.

Corn market are seen mixed to firm on short covering with gains limited by rising export competition. Brazilian farmers may harvest 92.807 MMT of corn this year, up from 91.652 MMT projected in February and well above the 80.709 MMT produced last season, Brazilian government agency Conab said this morning. The agency said exports will reach 31 MMT this year, unchanged from its February forecast and 24.767 MMT shipped last year. South Korea's largest feed maker Nonghyup Feed Inc. (NOFI) purchased some 68,000 MT of optional origin corn on Tuesday, continuing a brisk period of Korean corn purchasing after prices fell, Reuters reports. The fall has sparked a series of major purchases by buyers including NOFI, the Korea Feed Association (KFA) and the Feed Leaders Committee (FLC). Taiwanese group MFIG also issued a tender for 65,000 MT of corn on Tuesday. South Korea's Korea Corn Processing Industry Association (KOCOPIA) purchased about 60,000 MT of optional origin food-quality corn for delivery in May.

Soybean futures seen mixed to firmer as smaller Brazil crop forecasts offset fund selling amid U.S./China trade pessimism. Brazil’s Conab revised its soybean production estimated down to 113.459 MMT, down from 115.343 MMT forecast in February and below 119.281 MMT harvested a year ago. The government agency also cut its soybean export forecast to 70 MMT from 71.5 MMT seen in February and below the 83.605 MMT last season. Agribusiness consultancy AgRural said today that Brazilian farmers will collect 112.9 MMT of soybeans this season, up from a previously forecast 112.5 MMT, as rains returned and helped yields in certain regions. 

Wheat futures seen bouncing from lowest for the most-active contract in 14 months on bargain buying, but gains are limited as abundant world supplies and fund-selling kept a lid on prices. Global demand for wheat continues to lag despite increasingly competitive prices and early prospects for large harvests in Europe and Russia this year. On Monday, USDA reported 592,001 MT of wheat were inspected for export last week, including 42,000 tons shipped to China.  USDA state crop reports showed Kansas winter wheat conditions rose 2 points to 51% rated in good and excellent condition, Oklahoma ratings rose to 56% good and excellent, up from 53% a week earlier and Texas fell sharply from 36% rated good and excellent to 28% this week.

Livestock Calls:

Cattle: Steady to firm

Hogs: Steady to firm

Cattle futures seen steady to firm continuing the recovery seen on Monday. Wholesale beef prices rose again Monday with Choice up $1.23 and Select rising 85 cents. Choice is the highest since June 5. Business was slow and slaughter expanded to 119,000 head, up from 116,000 a week ago and 114,000 a year earlier. There is a lot of good news in the market and talk is the March boxed beef rally will be coming to an end this week or early next week. The cutout typically goes sideways to lower into April before staging its biggest rally of the year into May, that sometimes persists into June. Cash cattle seen steady this week after moderately active trade volume last week and rising packer-controlled supplies will limit strength in cash markets. Rising temperatures, big rains, snow melt in Nebraska and Iowa this week will increase feedlot mud and keep cattle sales elevated to avoid poor pen conditions.

Hog futures seen firming today on strong cash markets. The national average cash hog price rose $1.24 and the Iowa/Minnesota average price jumped $1.76. The wholesale pork carcass value rose $1.38 to $66.42, the highest since Feb. 4 as every cut advanced. Sales were light for a second straight session in the face of elevated supplies. Slaughter rose to 475,000 head, up 3.5% from 459,000 a year earlier. China has banned imports of pigs, wild boars and related products from Vietnam as African swine fever spreads across the country. This comes as China battles its own outbreak.


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