After the Bell: Soybean Rally Stalls Amid Worries China Buying May Be Over

Posted on 01/08/2019 3:02 PM

Corn:  Corn futures settled 1 to 2 1/4 cents lower, which was in the lower end of today’s range.  Corn futures mildly favored the upside through overnight trade and early this morning. But as the soybean market softened, buyer interest in corn dried up and the market softened. With today’s low-range close, bears have the slight upper hand heading into overnight trade. Traders were expecting China to buy upwards of 3 MMT of U.S. corn at some point this month. While there has been talk of soybean and wheat purchases by China, it has been relatively quiet on the corn front. Even if there was talk of China buying corn, there won’t be any official confirmation until the partial government shutdown ends and USDA reopens. The lack of solid demand news aside from weekly shipments inspected for export is hanging over the market like a wet blanket.

Soybeans:  Soybean futures settled down 3 to 6 cents after yesterday rising to three-week highs. Soybean meal futures ended 30 to 60 cents lower today, retreating from 2.5-month highs on Monday. Bean oil closed down about 8 points in the nearby contracts. The market ran out of gas yesterday amid reports of progress in the first day of U.S./China trade talks and indications China bought additional cargoes of U.S. soybeans. The failure to even challenge Monday’s highs turned recent buyers to the sell side of the market. Even news today that U. S. and Chinese negotiators will continue trade talks in Beijing for an unscheduled third day as the world's two largest economies looked to resolve their bitter trade dispute could not encourage fresh buying.  The two sides had extended their trade talks late into a second day in Beijing on Tuesday, but few other details have emerged. Investors are worried that China may have bought all the U.S. soybeans they are going to buy as part of any agreements that may be negotiated this week in Beijing. Both U.S. and Chinese trade officials want guarantees for agreements reached this week. China approved five genetically modified (GM) crops for import on Tuesday, the first in about 18 months, in a move that could boost its overseas purchases of farm goods.

Wheat:  Winter wheat futures settled up 1 to 2 1/4 cents today and near mid-range after scoring two-week highs early on. Spring wheat settled ¼ to ¾ cents lower. Russian grain traders returned from extended Christmas holidays on Wednesday and traders are looking for more price offers to gauge remaining Russian supplies and upcoming competition for U.S. wheat.  While U.S. export prices are competitive new sales and shipments continue to disappoint. There is increasing talk that U.S. farmers planted less winter wheat than a year-ago, cutting acreage to the lowest since at least 1909, and that is providing light underlying support on wheat futures price weakness. As the U.S. government shutdown enters what could be a record-breaking third week, key USDA reports continue to be on hold.

Cotton:  Futures prices ended down 100 to 108 points in the old-crop contracts and near their daily lows. Slowing economic growth in both Europe and China offsets growth in the U.S. and India and may curb overall demand. Traders are already talking about an increase of 750,000 to 1.5 million acres in U.S. cotton plantings this spring. The United States and China will continue trade talks in Beijing for an unscheduled third day tomorrow, a member of the U.S. delegation confirmed on Tuesday, as the world's two largest economies looked to resolve their bitter trade dispute. A third day of talks bodes well that specific issues have agreements. It will be critical for this weak market to see China agree to buying some U.S. fiber. The drop to a 13-month low last week finally spurred aggressive mill purchases. That buying was limited this week, allowing prices to resume the weaker trend. World and Chinese inventories are heading lower this year, typically a positive fundamental factor. 

Hogs Lean hog futures closed up 70 cents in the February and down 35 cents in the April, with both contracts closing near mid-range. The April contract hit a nearly two-month low today. Cash hog bids are firming and will continue to support futures, given the premium February futures currently hold to the cash index. The national average cash hogs price rose 67 cents on Monday after gaining $3.05 last week. With packers moving plenty of pork and cutting margins deep in the black, recent gains in the cash hog market are expected to continue. Wholesale pork prices rose 32 cents at midday today, led by gains in loins, ribs and hams. Movement was 285.14 loads. Positive U.S./China trade talk progress this week increases chances for stepped up China buying of U.S. pork amid worsening African swine fever outbreaks in China.  

Cattle:  Live cattle futures finished 40 cents to $2.10 higher, with the front-month February contract leading gains. Feeder cattle posted gains of $1.325 to $1.625 higher through the May contract. Live cattle futures aggressively built on Monday’s gains, with many of the contracts rallying to new highs. Fundamental support came from strong wholesale beef demand and bullish expectations for cash cattle trade this week. Morning boxed beef trade showed mild price declines, but an active 113 loads of product were moved. Continued strong beef demand and profitable cutting margins are just two of the reasons traders are expecting strength in the cash market again this week. Showlist numbers are also down from last week.

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