Ahead of the Open: More Quiet Holiday Trade with Underlying Support on China Buying Hopes

Posted on 12/26/2019 8:00 AM

Grain Calls

Corn:  Steady to mixed
Soybeans: Steady to weak
Wheat: Steady to slightly higher

GENERAL COMMENTS:  Grain and livestock markets resume trading at 8:30 a.m. CT. Grain and soybean markets expected to see mixed trade to begin and then we will see if  the approaching signing of the China trade deal buying resumes. Oil rose further above $67 a barrel to its highest in over three months on Thursday, buoyed by a report showing lower U.S. crude inventories, by hopes of an end to the China-U.S. trade dispute and OPEC-led efforts to constrain supply. Stronger oil and weakness in the dollar against most emerging margin currencies are provide a positive background.

Parts of southern and central Brazil will be dry thru the 7-day outlook, but those areas have adequate moisture profile. Week two will see abundant rainfall for most of central brazil and east into western Bahia. Argentina will get widespread 2 to 4 inches of rain through day 10 of the forecast. Dry areas of Argentina are shrinking daily. South America weather remains non-threatening and price negative.   

The U.S. and China are in close contact relative to signing the Phase 1 trade agreement, Chinese Commerce Ministry spokesman Gao Feng said today. This comes as President Donald Trump on Tuesday said the deal was "done" but was being translated. He said there would be a signing ceremony for the deal at the White House. Gao said the two sides are still going through needed procedures relative to the Phase 1 agreement.
China’s November soybean purchases from the United States surged to the highest in 20 months, data showed yesterday, as cargoes booked by importers with tariff-free quotas cleared customs. China brought in 2.56 million tons of U.S. soybeans, up from zero a year ago and 1.147 million tons in October and the highest since March 2018, after China issued waivers to exempt importers from hefty tariffs for some American cargoes. Shipments of U.S. soybeans plunged in the same month last year as buyers stayed clear of the U.S. market after China slapped hefty tariffs on a list of American goods including soybeans amid trade tensions. Crushers have made more rounds of purchases of U.S. beans in recent months after China issued tariff-free quotas. 
Also in November, China brought in 3.86 million tons of soybeans from Brazil, down 24 percent from 5.07 million tons in the same month last year. Brazilian shipments were slightly up from last month's 3.793 million tons, as buyers stocked up ahead of China's Spring Festival holiday, a peak season for meat and oils. China's pig herd has started to recover in recent months, the government said, following a series of measures to boost production. Chinese companies are likely to continue purchasing American soybeans as the two countries are expected to sign the partial trade deal in early January.

The U.S. Department of Agriculture’s daily export sales reporting service did not report any new large sales this morning but none were expected.  

Corn: Futures are near season lows due to slow export demand. Corn needs new China demand to offset talk of record World 2020 crops.

Soybeans: March Soybean futures are above all key moving averages. Prices are also closing on of season highs. Optimism for a U.S. and China trade deal is supportive. Futures could trade higher once a new US/China trade deal is signed, the list of US Ag goods China will buy is announced and actual China buying begins. 

Wheat:  SRW wheat futures are near season highs on uncertainty over Russia trade policy. Parts of eastern Europe and the Black Sea region remains dry and will need snow to improve moisture profile ahead of spring.

Livestock Calls
Cattle: Steady to firm
Hogs: Steady to firm

Cattle: Futures seen mixed amid uncertainty about cash trade this week. After little trade to start the holiday week, there’s a lot of work for packers and feedlots to do in order to come together on this week’s trade. There also wasn’t any reported wholesale beef trade Tuesday or Wednesday as government offices were closed for Christmas. It still looks like beef reached a seasonal low last week and one packer was bidding steady money on Tuesday.

Hogs: Packer demand for cash hogs coming out of Christmas is uncertain. While market-ready hog supplies are abundant, there’s talk some plants may be short-bought on near-term supplies. But slaughter schedules will be altered again next week by the New Year’s holiday, so kill needs will be reduced from a normal week. China's large pig farms are lining up with small, family-based farms in a state-initiated investment of nearly 50 billion yuan ($7.14 billion) to boost hog productions hit hard by a deadly swine disease, the agriculture ministry said. Fifteen leading pig farms in Beijing on Thursday signed 19 agreements with local governments in 16 Chinese cities such as Liangzhou of western Sichuan province and Engshi in central Hubei, to raise pigs together, the Ministry of Agriculture and Rural Affairs said. These projects are expected to produce more than 22 million hogs for slaughter annually and involve 33,000 poor rural families, the ministry said, without giving a timeline. China said on Wednesday it will sell 20,000 MT of frozen pork from its state reserves on Dec. 27, in the latest move to ensure supplies ahead of the upcoming Lunar New Year holidays.

Add new comment