After the Bell: Soybeans Tumble on U.S./China Trade Skepticism; Wheat Rallies

Posted on 11/26/2018 2:53 PM

Corn:  Futures closed 2 ½ to 3 cents lower, with December falling 3 cents to close at $3.56 and March falling 2 ½ cents to $3.68. Market participants are increasingly doubtful the U.S. and China will be able to come to an agreement on trade, sending soybean futures sharply lower and dragging corn along. While trying to forecast trade politics is extremely difficult, the break below technical support helped to encourage additional selling in both markets. The U.S. and China economies are slowing, so there is pressure on both sides to come out of the meetings in Argentina this coming weekend with some framework and show progress is occurring for a solution.  President Trump isn’t pleased with what he perceives to be Treasury Secretary Mnuchin’s dovish attitude towards the China trade agenda, according to the Wall Street Journal.Demand for corn is improving but that did not halt the drop in prices. South Korea bought 69,000 metric tons of U.S. corn on Monday for April delivery at $202.81, down from $206 to 207.21 the country paid Nov. 16 for 138,000 MT. Corn inspected for export in the week ended Nov. 22 rose to 1.118 MMT from an upwardly revised 845,947 MT a week earlier, USDA said this morning. That was just above the 700,000 MT to 1.1 MMT expected.

Soybeans:  Soybean futures posted losses of 15 1/4 to 18 3/4 cents through the November 2019 contract, which was a low-range close but off session lows. Meal futures ended $2.60 to $3.00 lower. Soyoil posted losses of 65 to 69 points. Uncertainty about a resolution to the trade war with China weighed heavily on the soybean market today. On Nov. 1, a tweet from President Donald Trump saying he would meet with Chinese President Xi Jinping at the G20 summit, fueled a strong price rally. Since that point, the market has traded sideways awaiting more details. As the meeting at the end of this week draws closer, it appears there is now skepticism anything meaningful will develop. It appears a “framework” deal might be the best outcome. And even if there’s a more concrete plan toward resolution, the window for China to buy U.S. soybeans in 2018-19 is quickly closing. Brazil will start harvesting early planted soybeans by late December and some new-crop Brazilian beans should be ready for export by mid- to late January. The soybean market appears to be coming to the likely realization that U.S. ending stocks will swell to around 1 billion bu. in 2018-19. As a result, the premium traders built into the market on the first day of this month has now been mostly removed. Weather in Brazil remains mostly favorable for planting and crop development. Weather hasn’t been as favorable in Argentina, but there are few significant concerns at this point. Overall, South American weather is one of little concern for traders as production is projected to rebound significantly from last year.

Wheat:  Winter wheat futures gained 4 1/4 to 7 3/4 cents today today on short covering from recent selling pressure. Prices finished nearer their daily highs. Nearby HRW futures set new contract lows early on today. Spring wheat closed up ¾ cent to 2 3/4. Nearby wheat futures are gaining on deferred contracts, which is usually a bullish signal. There has been an increase in global wheat demand, beginning last week when Egypt bought half of the 220,000 MT of wheat from the United States. Algeria, Turkey and Iraq are also tendering for wheat and confirmation of new U.S. sales would further enhance the bottoming action.The grains marketplace is closely watching developments in the Azov Sea after Russia fired on Ukraine navy vessels Sunday and captured sailors. The Kerch Strait was temporarily closed after the incident. This key shipping artery has reopened. The U.N. Security Council will hold a meeting today and there could be new sanctions placed on Russia.


Cotton:  Cotton futures finished 117 to 248 points higher and closed high-range. December futures, which entered delivery, led today’s gains. Cotton futures started firmer amid weakness in the U.S. dollar index. Buyer interest continued to build through the day despite the dollar eventually working higher and sharp losses in both the soybean and hog markets amid uncertainty heading into the late-week meeting between President Donald Trump and Chinese President Xi Jinping. If traders grow more skeptical of a solid trade deal in the upcoming meeting, buyer interest could fade. There continues to be weather/crop uncertainty with the cotton crop. The longer harvest drags on, the greater the odds USDA’s cotton crop estimate will decline further in the Dec. 11 Crop Production Report. This afternoon’s harvest progress data must trigger enough concern to produce followthrough buying or futures are at risk of profit-taking tomorrow.

HogsWe advise livestock producers to extend corn-for-feed and soybean meal coverage another two weeks in the cash market through mid-January. Futures fell $1.05 to $2.275 and ended in the bottom half of the daily range. December futures fell $1.675 to close at $57.40, while February lost $2.275 to $65.55.  Winter weather closed movement of animals to some plants today. Slaughter fell to 452,000 head from 479,000 a week ago. Worries supplies have become backlogged and will lead to lower cash bidding the remainder of the week pressured futures. Supplies the next four weeks are expected to remain at record levels. Pork carcass prices were higher at midday, gaining $2.53. Bellies led the rally today after last week’s USDA Cold Storage report showed smaller inventories at the end of October.

Cattle: Live cattle futures closed down 5 to 30 cents and near mid-ranges today, on corrective pullbacks from recent gains. Feeder futures were down 32 1/2 cents in the January and up 12 1/2 cents in the March contract. Nearby live cattle futures were pressured in part by the premium those contracts hold to the cash cattle market. According to USDA, last week’s average cash trade took place at $115.39, marking a decent rise from the prior week’s trade. Pressure on cattle futures also came from some spillover selling from weakness in hog futures. Choice and Select boxed beef values firmed 50 cents and $1.01, respectively, today on very light movement of 17 loads.


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