Good morning!
Corrective pullbacks in grain futures overnight… As of 6:00 a.m. CDT, December corn was down 1 1/4 cents. January soybeans were 6 1/4 cents lower. December HRW and SRW wheat futures markets were down 1/2 to 1 1/2 cents. The markets at mid-week are seeing routine downside price corrections following recent good gains. Tuesday’s mid-to-low-range closes in the grains hint the bulls may now be short-term exhausted. The soybean bulls are disappointed prices were not boosted by overnight reports China purchased U.S. soybeans. (See item below.) The key outside markets today see the U.S. dollar index modestly up. Nymex crude oil prices are up a bit and trading around $60.50 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently 3.99 percent.
Chilly, windy, chances of showers in central U.S. at mid-week… The National Weather Service today reports widespread showers and thunderstorms are expected today along the northeastward track of low pressure through the Ohio/Tennessee Valleys during the day and into the Mid-Atlantic by tonight. Moderate to locally heavy rainfall may lead to some isolated flash flooding concerns. A digging upper-trough and surging cold front will help to reinforce a colder, well-below-average air mass across much of the eastern and central U.S., especially the southern areas. Widespread frost and freeze-related advisories are in effect across much of the central and southern High Plains as lows drop into the low 30s. Gusty winds are also expected across much of the central/southern Plains to lower Mississippi Valley as northerly winds strengthen behind the deepening low pressure system to the east. Some light showers are possible in the northern Plains/Upper Midwest the next couple of days. Meantime, an upper-ridge over the western U.S. will continue to bring well-above-average, mild to hot temperatures through mid-week.
China reportedly buys at least two cargoes of U.S. soybeans… China has bought at least two cargoes of U.S. soybeans, its first known purchase this marketing year, according to a report from Bloomberg. However, Reuters overnight reported three U.S. soybean cargoes were purchased by China, citing two trade sources. State-owned COFCO bought about 180,000 metric tons of U.S. soybeans for December and January shipment through Pacific Northwest ports, said the Reuters report. The reported purchases may mark a revival of more U.S. soybean sales to China as part of a wider trade settlement expected to be agreed between the world’s two biggest economies this week. “The shipments are booked for loading and possible delivery later this year, according to people familiar with the matter. They asked not to be named as they are not authorized to speak to media,” said the Bloomberg report. Chinese and U.S. trade officials reached a broad framework agreement last weekend in Malaysia, paving the way for Chinese President Xi Jinping and President Trump to finalize a trade deal that would roll back many of the tariffs, fees, and export restrictions threatened or implemented in recent weeks. The two leaders are due to meet in South Korea on Thursday. “China’s appetite for U.S. soybeans may also be tempered as the world’s second-largest economy struggles to regain growth momentum, limiting demand for animal feed and food. Moreover, Beijing’s long-term strategy to diversify suppliers and reduce reliance on the U.S. is expected to remain in place,” said the Bloomberg report.
Trump says U.S., South Korea trade deal close… President Trump said the U.S. has a “special bond” with South Korea as he addressed a meeting of corporate leaders at the Asia-Pacific Economic Cooperation summit. Trump expressed optimism a trade deal with South Korea “will be finalized very soon” and said any agreement with Chinese President Xi Jinping would benefit the region broadly. Trump stressed economic ties during his address, noting plans for joint shipbuilding efforts between South Korean and U.S. firms, and called South Korea “cherished American friend and a close ally.”
Trump happy with tariff truce extension with Mexico… President Trump said the tariff truce extension with Mexico is a positive step because Mexico already pays significant tariffs benefiting the U.S. “I like the extension with Mexico,” Trump told reporters on Air Force One today. Trump said the existing tariff rates are sufficient to help convince car companies to move manufacturing back to the U.S. The extension, announced by Mexico Tuesday, allows the two sides to finish work on a more comprehensive agreement, according to Mexican President Claudia Sheinbaum.
Fed rate cut likely today… The Federal Reserve’s Open Market Committee meeting that began Tuesday morning ends this afternoon with a statement and press conference from Fed Chairman Jerome Powell. The FOMC this afternoon is widely expected to deliver a second straight 0.25% interest-rate cut. While the Fed rate cut is widely expected, traders and investors will closely examine the FOMC statement and Powell’s press conference, for any fresh clues on the trajectory of U.S. monetary policy in the coming months. Said Bloomberg in a report: “Traders are looking to Powell’s remarks to determine their next move at a time when U.S. policymakers have grown increasingly divided on the outlook for interest rates. A softening labor market is bolstering the case for easing, although that’s being complicated by data showing that a core measure of inflation remains well above target. Swaps pricing indicates that investors have fully priced in a quarter-point rate reduction at the Fed decision on Wednesday, and around three more cuts by July. But Powell’s comments may alter the equation, which could set the stage for Treasuries to snap out of their inertia.”
Selling pressure continues in Malaysian palm oil futures… Malaysian palm oil futures on Wednesday tumbled around 1.7% to below MYR 4,250 per MT, extending losses for the fourth consecutive session and reaching their lowest level since early August. The steep decline was driven by a stronger ringgit and weakness in rival vegetable oils traded in Dalian and Chicago markets. In top producer Indonesia, palm oil output could rise to around 56 million metric tons this year, higher than earlier projections, data from the country’s palm oil association GAPKI showed. Meanwhile, demand prospects dimmed as winter approaches, when palm oil consumption in key buyers such as India and China typically slows. On the export front, shipments during October 1–25 fell by about 0.3%–0.4% month-on-month, according to cargo surveyors, reinforcing expectations of softer demand. Still, losses were partly limited as President Trump has expressed optimism about reaching a trade truce with China.
Cattle futures markets still on shaky ground… The live and feeder cattle futures markets this week hit three-month lows. Live cattle bulls on Tuesday worked to stabilize prices amid the present steep downdraft. However, the bleeding continued in feeder cattle futures Tuesday. Long liquidation and likely margin-call selling by the speculative futures traders has been featured in the live and feeder cattle futures markets the past five sessions. This follows news last week that President Trump vowed to lower U.S. beef prices. Meantime, Mexico’s agriculture minister will travel to Washington D.C. this week to work on an agreement to reopen the U.S. border to Mexican cattle. It was surprising to see USDA at midday Tuesday report active cash cattle trading so early in the week. Producers must be spooked that lower cash cattle prices are coming. USDA at midday today reported active trade at $229.79 versus last week’s average of $237.89.
Technical sellers pressuring lean hog futures… The lean hog futures market on Tuesday hit a three-month low and saw more chart-based selling pressure from the speculators. Bearish technicals, steadily declining cash hog prices and very shaky cattle futures markets recently are all weighing on the hog futures market. December lean hog futures’ discount to the cash index has somewhat limited selling interest in futures lately. The latest CME lean hog index is down another 68 cents at $92.27. Today’s projected cash hog index is down another 24 cents at $92.03. Tuesday’s national direct 5-day rolling average cash hog price quote was $88.16.