After the Bell: Quiet Session Waiting on China Tenders for U.S. Ag Products

Posted on 12/05/2018 3:16 PM

Corn:  Nearby contracts finished down 1/4 to up 1/2 cent in quiet trading today. Nearby futures did post four-week highs today but closed near mid-range. The corn market is waiting for signs the recent uptick in U.S. export sales was the start of more business developing to lock in current low prices. Weekly USDA export sales data will be out on Friday morning this week—delayed by a day due to the national day of mourning Wednesday for the late President George H.W. Bush. Corn is also finding underlying support from firming cash bids across the Midwest as farmer sales have slowed again after picking up slightly earlier this week. A Reuters poll shows traders on average are looking for U.S. corn ending stocks before the 2019 harvest to be little changed at 1.738 billion bushels, compared with 1.736 billion estimated by USDA last month and 2.14 billion last year. The government is scheduled to release its update on Dec. 11. World corn reserves may rise to 307.59 million metric tons, up from 307.51 MMT estimated last month but still down sharply from 340.92 MMT last year.

Soybeans:  Soybeans closed in the upper half of the daily trading range and above the opening range, with January beans rising 1 ¾ cents to settle at $9.13 ½. January meal was down 80 cents at $313.90 and January soybean oil fell 6 points to 28.84 cents. Price are supported amid speculation that new Chinese buying may soon surface. Chinese officials finally said the Dec. 1 trade truce has a “clear timeline and road map.” White House officials have said that China has pledged to purchase more agricultural products from U.S. farmers “immediately.” Traders are still awaiting Chinese buys. How much China would buy from the U.S. with Brazil supplies likely available by January is limiting buying to mostly short-covering, rather than new long positions. and foreign agricultural affairs, will lead to developing markets like Colombia, Kenya and Vietnam and regular trading partners including Canada, Mexico and the U.K.  Some support for the market is coming from a recent Purdue University survey that showed 30% of soybean growers said they plan to reduce soybean acreage in 2019, up from 19% that planned to reduce their acreage just one month earlier. About 69% of respondents said they would reduce their acreage by more than 10 percent. 

Wheat:  Winter wheat futures closed lower but near midrange, with March SRW wheat falling 4 ¼ cents to $5.18 ¼ and March HRW futures closing 7 3/4 cents lower at $4.97 1.2. Spring wheat futures closed 3 ¾ to 4 3/4 cents lower. The market was pressured on news that Egypt had failed to issue letters of credit covering 16 recently purchased cargoes. The potential delays concerned Black Sea and U.S. wheat origins and the problem means some deliveries had not been paid and others will be delayed at least a month, until the government gets its finances back in order. The finance ministry is expected to get a $2 billion loan from the IMF this month and plans to offer another $5 billion of foreign currency bonds in January. Egypt produces about 8 MMT of wheat and consumes about 20 MMT, requiring large imports that are subsidized for government sales. Ukraine said on Tuesday it had resumed grain shipments from the Azov Sea, blocked for around 10 days after a military standoff with Russia in the Kerch Strait off Crimea. Russia says its grain shipments won’t be hindered much as grain movement out of the Azov Sea slows seasonally during winter.

Cotton: Soon-to-expire December cotton closed up 134 points. March cotton finished up 130 points and closed at a six-week high close today. The bulls bounced back today. However, the U.S. stock and financial markets were closed today, so the cotton market bulls got a reprieve from a wobbly U.S. stock market. If the U.S. stock indices see more selling pressure this week that could put downside price pressure on the cotton futures market. On the U.S.-China trade front, White House officials said they plan to take a tough stand in their 90-day trade negotiations with China or impose further tariffs. President Donald Trump tweeted, “We are either going to have a REAL DEAL with China, or no deal at all - at which point we will be charging major Tariffs against Chinese product being shipped into the United States. Ultimately, I believe, we will be making a deal - either now or into the future.” Chinese officials finally said the talks have a “clear timeline and road map.” USDA Secretary Sonny Perdue continued to urge reducing reliance on China as major market. “While we’re all worried about China and its impact on our business, I say that we probably became too dependent on one customer,” Perdue said.    

Hogs: The soon-to-expire December contract closed down $1.05 today. February hogs gained $1.575 and the April contract was up $1.275. December hogs are being pressured by ongoing weakness in the cash hog market. According to USDA, average cash hog trade fell 85 cents Tuesday to a weighted average around $48.60. Hog slaughter is up 30,000 head from a week ago and up 13,000 head from the same time last year. Hefty market-ready supplies continue to pressure the cash market. February and April futures were boosted in part today from the noon report showing pork product prices gained 86 cents today, with butts, ribs and bellies scoring gains. Movement was 218.77 loads. Ongoing concerns about the African swine fever disease spreading in China continue to support the deferred lean hog futures.

Cattle: We advise fed cattle producers to exit the 25% fourth-quarter hedge in December live cattle futures. Our exit was $118.00 for a 32 1/2 cent loss. Live cattle closed higher and in the upper 25% of today’s range while feeders posted strong gains. February live cattle rose 52.5 cents to $118.30 and January feeders were up $1.15 to $145.55. Futures rallied on news of stronger cash cattle even as midday beef prices were marked lower. The Fed Cattle Exchange reported a couple of pens for delivery in 1 to 9 days sold at $117.75. The Tama, Iowa fed cattle sale, which was much larger, also had cattle sell for the same. These prices are basically steady to higher from last week. Winter weather late this week across the southern Great Plains is likely to further slow down weight gains and may keep a firm tone under the fed cattle market into next week.  While both Choice and Select beef prices were slightly lower this morning, sales were outstanding and added to the positive futures undertone. Still, beef prices probably are peaking ahead of the year end holidays. Cash feeder cattle continue to weaken as feedlots are full and supplies are heavy. The strength in live cattle provided underlying support to the feeder cattle market.

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