After the Bell: Grains, Soy Retreat on China Deal Snag, Improving Weather

Posted on 11/13/2019 2:37 PM

Corn:  Corn prices closed lower and near session lows. December corn was down 2 ½ cents to $3.75 ¼ and March fell 2 ½ to $3.84.  A lack of fresh positive news and little follow-through buying to Tuesday’s modestly positive close increased selling pressure throughout the session. Each rally ran into a new wave of selling amid the weak U.S. export outlook and improving weather outlooks. Adding to the overall negative tone were reports that U.S.-China trade talks have a “hit a snag” over the size of farm purchases with China not willing to sign a deal that looks one-sided in the favor of the U.S., The Wall Street Journal reported at midday. Brazil’s USDA equivalent Conab cut its 2019-20 corn crop forecast 30,000 metric tons (MT) to 98.4 MMT. The statistics agency maintained its export forecast at 34 MMT. For the first 10 months of 2019, Brazil has exported 34.7 MMT of corn, topping the previous record for the period by a dramatic 60%. On the other hand, the U.S. exported around 36.2 MMT of grain during this 10-month span, a 40% drop from the previous season. Meanwhile in Argentina, the Cordoba grain chamber says that farmers in Argentina will lose 9% of investment on their first crop of corn, and 27% on their second crop, if the Peronist governments puts a 20% tax on exports and caps the amount of grain that can be exported.

Soybeans:   January soybean futures closed down 1 3/4 cents at $9.15 1/4 and hit a six-week low today, while closing near the daily low.  The soybean futures market this week has seen selling pressure on worries about a U.S.-China trade deal being completed anytime soon. The Wall Street Journal at midday today reported the U.S. and China have hit another snag on their trade talks, this time regarding specific amounts of U.S. agricultural products China would purchase in a trade deal. Improved Corn Belt weather for harvesting late this week is also a negative for price action. South American crops are now in focus for rising competition for U.S. grain exports. Brazil’s Conab expects the country’s 2019-20 soybean crop to hit a record-high of 120.86 million metric tons (MMT), a 460,000-MT increase from October. It stuck with its 72 MMT export forecast for the oilseed. USDA daily export sales reporting services today said private exporters sold 106,000 metric tons (MT) of soybeans for delivery to unknown destinations during the 2019-20 marketing year. That confirms some of the talk about China buying seven cargoes, or 400,000 to 420,000 MT of U.S. soybeans this week.

Wheat:   December SRW wheat futures closed down 8 cents at $5.09. December HRW futures lost all of Tuesday’s good gains that pushed prices to a three-month high, finishing the day down 14 cents at $4.24 3/4. Spring wheat fell 6 to 7 cents on Wednesday. Wheat traders today decided to focus on the bearish fundamentals of slack demand for U.S. wheat, eroding hopes for a partial U.S.-China trade deal any time soon and more wheat exports coming out of the European Union. The Wall Street Journal today reported the U.S. and China have hit another snag on their trade talks, this time regarding specific amounts of U.S. agricultural products China would purchase in a trade deal.USDA reported Tuesday afternoon that 92% of the U.S. winter wheat crop had been planted as of Sunday before an arctic blast hit the country’s midsection, possibly causing some winterkill and bringing planting efforts to a halt. The key producing state of Kansas had 96% of the crop in the ground. As of Sunday, 78% of the crop had emerged, which is three percentage points behind the five-year average. USDA unexpectedly shaved three points off the amount of crop it rates “good” to “excellent,” dropping that figure to 54%. That’s steady with last year at this time.

Cotton: Cotton futures faced pressure throughout the day and settled low-range and down 23 to 52 points, with nearbys leading losses. The market continues to hold within an increasingly narrow range in consolidated trade.  Sideways trade continues in the cotton market as the market lacks direction. USDA’s reports last week were a bit friendly, but not enough so to push the market out of its range-bound trade. USDA’s crop progress update yesterday showed cotton harvest continues to advance at a decent rate, with harvest 62% complete as of Sunday versus the five-year average rate of 59% finished at this point in the season. A lack of concrete developments on the U.S./China trade front has also contributed to weeks of sideways trade. The two sides continue to spar over any rollback of tariffs and there were reports that talks hit a snag today over farm purchases. It’s unclear at this point whether this is just a grab for news at a time when all is pretty quiet on the trade front or a real development. In any case, this contributed to a softer close.

Hogs: Lean hog futures finished widely mixed, ranging from $1.60 lower in the lead December contract to modestly higher in summer-month contracts. Winter-month hog futures failed to find active followthrough buying after the strong closes yesterday, which touched off a round of corrective selling today. The premium December hogs hold to the cash market weighed on the lead contract. It’s unusual for December hogs to trade premium to the cash market, especially considering record slaughter levels. Therefore, more premium could be removed near-term. December hogs finished today more than $3.50 above where the cash index will be quoted tomorrow (for Nov. 12). Reports saying U.S./China trade talks “hit a snag” over Chinese purchases of U.S. ag products also weighed on the market. Until a trade deal is completed and signed, traders will be reluctant to build too much premium into futures even though China needs U.S. pork – with or without tariffs – to help fill major domestic production shortfalls.

Cattle:   Cattle futures fell to an eight-session low before paring losses. December cattle fell $1.65 to $118.10, while February cattle fell $1.475 to $124.10. Feeder contracts were down $2.225 to $4.30.  Today’s decline was almost all technical in nature after a near vertical advance the past two months without one serious correction. Once prices failed to take out Tuesday’s high the selling accelerated throughout the morning before selling eased and prices pared a portion of today’s declines. However, some feedlots were quick to take steady money for cattle supplies this morning after futures broke lower. But others were more willing to wait to see if packers come back with higher bids to finish this week. That’s especially true after wholesale beef prices rose again at midday. Choice jumped $1.75 and Select was up $1.26 on good sales. The Choice-Select spread at midday was $24.76, a sign that marketings remain current and cattle could stand to put some more weight on carcasses to grade out Choice. Packer margins remain near $300 a head and will help to limit setback in cash cattle.

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