Ahead of the Open: Cautiously Positioning Ahead of the Meeting Between Presidents Trump and Xi

Posted on 11/29/2018 7:41 AM

Grain Calls

Corn: Steady to down 1 cent
Soybeans: Down 4 to 6 cents
Wheat: Mixed

General Comment: President Donald Trump will dine with Chinese President Xi Jinping this Saturday to discuss trade relations while commodity market participants anxiously await the outcome. Trump said on Thursday said in a tweet that there was "a long way to go" on tariffs with China and urged companies to build products in the United States to avoid them. Conflicting tweets from Trump and members of his administration have also thrown analysts for a loop more than once this year.  Riskier assets, including grains and stocks, rallied yesterday in the wake of Fed Chairman Jerome Powell's speech, in which he indicated that current Fed policy was potentially “just below” what might be considered neutral. In other words, there might not be a need for many more interest rate hikes at this point. However, he also remains concerned about excesses in the financial system. The dollar fell sharply Wednesday, reversing gains from a two-week high. Today the dollar is slightly weaker, reversing earlier gains and that is a small positive for the grain markets. Crude oil futures are back in the green after dropping below $50 for the first time in more than a year. Russian Energy Minister Alexander Novak said on Thursday that Moscow expects OPEC and non-OPEC oil producers at a ministerial meeting in December to reach an agreement that is beneficial for the oil market. 

Corn is seen steady to weaker on falling energy prices, including ethanol prices dropping to the lowest in 13 years at some U.S. locations. The market gave back early overnight gains amid uncertainty on this weekend’s outcome of U.S./China trade meetings. USDA said this morning that export sales in the week ended Nov. 22 totaled a net 1.267 million metric tons, up 44% from the prior week and 77% higher the average the past four weeks. That will give the market some underlying support after several weeks of disappointing business.

Soybeans ran into selling after opening higher overnight. The market is more cautious about the success of  the meeting between Presidents Trump and Xi this weekend. Weekly exports sales last week were 628,800 MT, down 8% from the prior week. That was within trade expectations for sales of 400,000 to 900,000. However, China cancelled another 63,000 tons of prior sales last week. In addition, weekly soybean meal export sales were down 39% from the prior 4-week average.

Wheat futures are mixed to lower.Weekly export sales fell 25% below the prior four-week average with exporters selling just 377,100 MT in the week ended Nov. 22, USDA reported this morning.  Needed rain will impact much of Central Europe over the next 10 days. Moderate to heavy snow is forecast across the entirety of the Black Sea winter wheat belt and may provide a blanket of protections for winter wheat.  Russia is effectively blockading the Ukrainian ports of Berdyansk and Mariupol on the Azov Sea, preventing vessels from entering or leaving the port, Ukraine Infrastructure Minister Volodymyr Omelyan said today. The rising tensions will keep a floor of support under the market.

Livestock Calls

Cattle: Steady to firm

Hogs: Steady to firm

Cattle futures are seen steady to firmer on stronger cash markets.  Cattle sold at $116.75 at the online Fed Cattle Exchange on Wednesday, above last week’s average. However, wholesale beef fell on Wednesday with Choice down 72 cents and Select dropping $1.74. Export sales in the week ended Nov. 22 were down 26% from the prior week and 42% below the four-week average, USDA said this morning.  Light snow today across western Midwest areas to with a stronger winter storm probable for cattle in Nebraska, South Dakota, and parts of Kansas, Iowa and Minnesota on Saturday.

Hog futures seen steady to firm. The average national direct cash hog price rose 26 cents Wednesday, providing the first hint that the cash market may be in the process of putting in a low. Still, wholesale pork carcass values fell 53 cents on Wednesday moderate to light sales. USDA reported that pork export sales rose 7% above the four-week average with China taking 3,000 MT of the 20,900 MT sold last week. China may buy pork for its state reserves to support farmers struggling amid the African swine fever (ASF) outbreak in order to ensure adequate production. It is not known how much Beijing would buy but the purchases would support prices in areas that have not been able to sell their hogs, according to Wang Zuli, chief expert on pig production at the Ministry of Agriculture and Rural Affairs.

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