10:30 a.m. Market Snapshot

Posted on Wed, 12/18/2019 - 09:49

Corn futures are steady to a penny lower and well off session lows.  

  • March corn futures opened lower and fell near but not below yesterday’s session low.  Strong closing resistance is expected near $3.91. and then $4.00.
  • Corn futures are quietly consolidating the strong four-day rally off the three-month low at $3.71 reached Dec. 11.
  • The market continues to find light buying interest after last week’s news that China has committed to boosting its spending on U.S. ag goods to $40 billion per year beginning in 2020 and may include more corn and corn products.
  • The U.S.-Mexico-Canada Agreement should also be approved soon, which also has traders taking a more friendly stance toward the market heading into the holidays.
  • Funds have been large buyers, trimming their short position. More buying is likely heading into the holidays, with the Jan. 10 USDA Crop Production report likely to show a smaller U.S. crop.
  • Beneficial rains forecast this week in both Brazil and Argentina has put a cap on gains.

Soybeans are mixed to slightly lower in consolidation of strong gains to five-week highs yesterday.

  • March soybeans have traded both sides of unchanged this morning after opening lower overnight but holding above short-term support at Tuesday’s low. Stronger support is at the 40-day, 100- and 200-day moving averages between $9.25 and $9.20.  
  • U.S. basis continues to firm, and futures spreads are tightening, both positive signals.
  • Fund short covering has been the feature and further gains will require funds moving to establish net-long positions.  On Dec. 10, funds were net short more than 110,000 contracts.
  • Last week, China pledged to increase its total purchases of U.S. goods and services by at least $200 billion over the next two years, according to the U.S. Trade Representative. There's also a commitment to buy $40 billion to $50 billion in American farm commodities in each of the next two years.    
  • Traders are starting to talk about U.S. soybean exports to China continuing into the start of the normal Brazilian shipment period this spring.
  • Higher taxes on Argentine soybean and soybean product exports under the new president remain supportive.  

Winter wheat futures are trading near midrange with losses trimmed to 2 to 4 cents. Spring wheat futures are fractionally to a penny lower.

  • The March SRW futures opened lower but remain trapped inside of Tuesday’s range when prices touched the highest level since June 28. The summer peak remains more than 20 cents above current values.
  • Prices are consolidating the prior four-day rally. Traders are waiting for any details or clues to the size of any new Chinese purchases of U.S. wheat that might be in 2020.
  • The world market remains well-supplied and U.S. wheat is not competitive into many importing nations.
  • China sold 50,599 MT of 2014 through 2018 wheat at its latest reserve auction, which represented just 1.7% of the total that was offered, the country’s trade center reports. The reserve wheat sold for an average price of 2,321 yuan ($331.74) per metric ton. U.S. wheat is offered at $258 to $298 for delivery into Asia.
  • Yellow rust will likely curb China’s wheat production in 2020, as the disease has spread to key production areas in eastern and northwest areas of the country, the National Agricultural Technology Promotional Center said in a report this week.  

Live cattle futures mixed with nearbys higher and deferred months lower. Feeder cattle are posting slight declines.

  • Weakness stems from sharply lower beef prices. Wholesale Choice cutout values plunged $4.27 on Tuesday.
  • While beef weakness and packer margin contraction are normal for this timeslot, the weakness was more than expected. The Choice premium to Select cutout values has narrowed to about $9 from $23 four week ago. It no coincidence that the percentage of cattle grading Choice and Prime has increased sharply since Labor Day and now stand near record highs. 
  • Upcoming kills will be curtailed by the coming Christmas and New Year holidays, reducing the chances for firmer cash bids this week.
  • More details from U.S. Trade Representative Bob Lighthizer about the trade deal reached between the U.S. and China makes traders more optimistic an accord will indeed reach the finish line, boosting U.S. exports of beef to Beijing.  

Lean hog futures are slightly higher in most contracts.

  • February lean hog futures are at a double-digit premium to the cash hog index and holding relatively firm today. That’s a sign of optimism the cash hog market has bottomed and will work its way higher in the first quarter.
  • Comments from China’s state planner that it will import more pork and more details from Lighthizer about the trade accord that could be implemented as soon as February have traders cautiously optimistic about U.S. pork exports.
  • The focus is on Thursday’s weekly USDA export sales report.
  • Cash hog bids rose 12 cents to start the week and another 6 cents on Tuesday.
  • Packers continue to enjoy solid profit margins of $57.60 a head, according to HedgersEdge.com. That’s down a bit from week-ago levels, but still a strong figure.
  • The pork cutout value fell 75 cents on Tuesday as declines in most cuts offset another surge in Picnics, up $7.59 yesterday. Picnics are back near the five-year highs hit earlier this month.