Ahead of the Open: Wheat Leads Rally as China Invites U.S. Negotiators to Beijing for New Talks

Posted on 11/21/2019 7:27 AM

Grain Calls          

Corn: Up ½ cent to 2 cents
Soybeans: Up 2 to 3 cents
Wheat: Up 2 to 4 cents

General Comment: Wheat is leading the rebounds this morning with corn and soybeans following after sinking to new lows on Wednesday. Prices rebounded from a mixed overnight trade after China sent out some positive signals on trade. Prices have been weakening this week on reports that both sides were getting frustrated with each other’s demands to reach the Phase 1 portion of a grand deal. This morning, the Wall Street Journal is reporting that Liu invited U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to China for a new round of face-to-face talks. but China must first make it clear it would make commitments on intellectual-property protection, forced technology transfers and agricultural purchases, the article said citing people briefed on the matter.

This morning’s weekly USDA export sales report for the week ended Nov. 14 showed stronger sales of soybeans last week while corn and wheat fell about in the middle of trade estimates. Exporters sold 437,700 metric tons (MT) of wheat, up 29% from the prior four-week average with unknown destinates the best buyer. Corn net sales last week rose 49% above the four-week average to 788,000 MT with Mexico taking about half the total.  Soybean sales rose 39% above the prior four-week average to 1.517 MMT with China buying 568,600 MT.

China will strive to reach an initial trade agreement with the United States as both sides keep communication channels open, the Chinese commerce ministry said on Thursday, in an attempt to allay fears talks might be unravelling. China is willing to work with the United States to resolve each other's core concerns on the basis of equality and mutual respect, and will try hard to reach a "phase one" deal, Gao Feng, spokesman at the ministry, told reporters.

In a dinner speech in Beijing on Wednesday, Chinese Vice Premier Liu He said he was "cautiously optimistic" on a phase one deal, Bloomberg News said, citing people who attended the event ahead of the New Economic Forum. Liu, China's chief negotiator at the trade talks, separately told one of the attendees that he was "confused" about the U.S. demands, but was confident the first phase of a deal could be completed nevertheless, Bloomberg added.  

Former U.S. Secretary of State Henry Kissinger, who helped to open China back in 1971-72 said overnight that the two world leaders have entered the “foothills of a Cold War.” He emphasized that this period of relative tensions needs to be followed by an effort to understand what the political causes are and a commitment by both sides to try to overcome those differences.  

USDA daily export sales reporting service said private exporters sold 106,000 MT of corn for delivery to unknown destinations during the 2019/2020 marketing year.  That follows news Monday and Tuesday of new sales of 323,000 MT of corn sold to unknown destinations.


Corn: December corn may bounce from new eight-week lows but don’t look for any strong gains. Better exports are developing but have a long way to go to be bullish.

SoybeansJanuary beans fell to new lows overnight and rebounded on the offer for new trade talks in Beijing. Markets is stuck between some optimism and general confusion on the chances for a real trade deal.

Wheat: Futures seen steady to firm amid renewed hopes for increased Chinese buying of U.S. wheat. China has met with little enthusiasm for government sales of wheat that is as much as six years old because of the lack of quality. Shanghai JCI said yesterday that strengthen domestic price for wheat is  surprising given reports of a good harvest this year. Food inflation in China is becoming a a problem after  pork prices have already doubled this year. They don’t need bread prices firming up at the same time, so there is reason to watching for increased Chinese wheat interest.  Seasonal point higher into year end and fund are starting to buy. After three years of drought in Australia has increased Argentina’s focus on Asian markets to grow its share of the world wheat market. Exporters are aggressively prices wheat below both Russian and Australia supplies.

Livestock Calls

Cattle: Steady to mixed
Hogs: Steady to weak

Cattle:  Cattle are seen steady to mixed in a continued sideways consolidation of recent strong gains. Some cash cattle trading up to $116 in Texas and Kansas. That’s up a $1 from action last week in these states. Boxed beef prices have softened a few dollars this week, but packer margins remain very profitable and supportive to the cash market into December. The market is likely to remain quiet amid positioning ahead of Friday afternoon’s Cattle on Feed and Cold Storage Reports. USDA weekly beef export sales tally showed a 29% slowdown in sales from a week ago while shipments surged 86% that included substantial late reporting to Japan, South Korea, Mexico, Hong Kong and Taiwan.

Hogs:  Lean hog futures seen steady to weak after extending the recent hard drop on Wednesday. The market remains pressured by uncertainty about the U.S.-China trade talk outlook and rising slaughter levels. Slaughter this week is up 48,000 head from a year ago this week. Weights are also up year-ago levels. USDA yesterday reported that average weights in the key Iowa/southern Minnesota marked edged 0.2 lbs. lower the week ending Nov. 16 to 287.7 lbs., which is still up 4.3 lbs. from year-ago levels. Cash hog bids edged another 6 cents higher Wednesday. USDA said pork sales rose to 54,385 MT last week, more than double the week earlier but also included late reporting. Shipments were also up sharply because of the late report. The delayed reporting hid some of the business that has been going on recently, mostly to Japan, Canada and Australia. China bought 5,200 MT last week that included 100 MT and shipped 13,000 MT that only included 100 MT. That is a positive signal.

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