After the Bell: Quiet Finish on Friday after Posting Weekly Gains on U.S./China Trade Deal

Posted on Fri, 12/20/2019 - 14:27

Corn: Corn futures settled 3/4 to 1 1/4 cents higher through the December contract. For the week, March corn futures firmed 6 3/4 cents. Corn futures need to push above this week’s highs next week to build momentum on the rally off the midmonth lows. Doing so would likely cause traders to cover more short positions. A break below this week’s lows could trigger a pullback. With trading volume expected to be light around Christmas, it’s possible price action could be quiet and the market might not move much.  Attention will be on Chinese demand, as the Phase 1 deal is expected to be signed in early January. China is expected to increase purchases of U.S. corn, ethanol and dried distillers grains as it ramps up overall buys of U.S. ag goods. With corn export commitments running 42% behind year-ago and projected to be the smallest since 2012-13, the market needs a boost from Chinese buying.

Soybeans: January soybean futures closed up 3 3/4 cents at $9.28 1/4 today and near the daily and weekly high. For the week, January soybeans gained 20 3/4 cents. March soybean meal futures lost 50 cents today at $302.20 and closed at a technically bearish weekly low close. For the week, March meal gained 90 cents. March soybean oil futures fell 1 point today at 34.06 cents. For the week, March bean oil rose 119 points. The technical posture of the soybean market remains bullish, which is likely to produce some more chart-based buying by speculators next week. However, bullishness will be tempered by soybean meal futures prices that continue to languish not far above this year’s lows.U.S. soybean cash basis levels continue to firm, a positive signal for price action in the near term, after recent fund short covering.  Prices will likely be supported next week on some follow-through strength as grain trader attitudes late this week have become more upbeat on the U.S.-China Phase 1 trade agreement. Shanghai consultancy JCI said in a report Friday that China could meet its trade deal pledge of $40 billion in U.S. farm purchases in 2020. The Chinese consultant estimates China could buy around $18.7 billion (or 45 MMT) of U.S. soybeans. Focus is turning more to South American weather patterns in soybeans regions. Better rains in Argentina the past 24 hours and more in the forecast next week for much of South America could limit buying interest in futures.   

Wheat: Wheat future finished mostly 2 to 3 cents lower in SRW and HRS contracts. HRW futures firmed a penny-plus in most contracts. For the week, March SRW futures firmed 9 3/4 cents, March HRW futures rallied 19 1/2 cents and March HRS futures strengthened 11 cents. Next week’s trade will be interrupted by Christmas midweek and some traders will take an extended holiday vacation. As a result, trading volume is expected to be light and fresh news may also be limited. But next week’s trade could prove to be key in determining whether recent gains are extended or the market has posted a short-term top. Futures must push above Monday’s highs to confirm the bull flags on the daily winter wheat charts.  USDA’s estimate of winter wheat seedings will be released Jan. 10.  

Cotton: March cotton prices rose 38 points to close at 67.96 cents. Prices rose $1.95 this week, touching the highest since late July. The breakout to the upside this week will clearly put the 70-cent overhead resistance in sight for the market bulls.  Futures traders continue to assess what the U.S.-China trade deal actually means. However, if for nothing else, at least a path has been set for the U.S. and China to conduct trade. China did appear in Thursday’s weekly sales and exports data. But those sales were completed before the tentative deal was announced. Farmers have been tight holders of this year’s crop and another couple of cents will begin to pry some more cotton loose. Exporters are also a little short-bought to meet upcoming shipments. If China buying materializes after the reported singing date of early January, that could add to the bullishness.  

Hogs: February lean hog futures closed down $0.30 at $70.675 today and near mid-range in quieter trading. For the week, February hogs gained $1.175. Focus in the hog futures market will continue to be on pork U.S. exports, specifically expected increased demand from China. USDA reported pork sales last week fell to 26,800 MT, 23% below the four-week average, with China buying 5,900 MT. Exports were active at 39,200 MT, with China shipping 15,282 MT--the most in at least 10 months. The influential Chinese consultancy JCI estimates China will import around 1 MMT of frozen pork and offal from the U.S. as part of the Phase 1 trade deal. On Monday USDA will release the quarterly Hogs & Pigs survey. Traders surveyed by Reuters expected the hog herd advanced 3% on Dec. 1 from a year earlier as the number of hogs kept for breeding rose 1.6% in the quarter and market hogs rose 3.1%. Slaughter remained near a record pace this week, adding to the near-term supply concerns.  

Cattle:  Live cattle were mixed Friday, capping a quiet week of consolidation after rising to a new contract high last week. February cattle were down $1.75 to $125.80 this week. March feeders also fell $1.875 to $144.375. Firmer cash cattle this week is a big win for the market bulls as the futures premium to the cash market narrowed despite the steep drop in wholesale beef prices. Futures trading was very quiet, adding to the evidence this week was merely a correction. Much of this week’s cash market strength was tied to packers getting inventories set for the holidays. With beef prices this week falling below year-ago levels for the first time since June, it would not be surprising to see an improvement in both supermarket and overseas import demand surface during the holiday to get a jump on covering needs for the first half of 2020. Supplies are set to begin declining into January.