After the Bell: Grains, Soy Drop on Increased Pessimism on China Trade, Chart Selling

Posted on 02/07/2019 2:44 PM

Corn: Corn futures finished low-range with losses of 2 3/4 to 3 3/4 cents. Corn futures were pressured by spillover selling in the soybean and wheat markets today and fresh concerns about U.S./China trade talks after comments from top U.S. officials. See “Evening Report” for more. But U.S. officials talked down progress on trade talks ahead of the early December and early January meetings, so this could be nothing more than that again. However, traders continue to respond to comments from U.S. officials, especially when they appear negative. Price action is likely to be light overnight and ahead of USDA’s crop reports at 11:00 a.m. CT. Given the price pressure today and the months-long sideways trading range despite supportive fundamentals, we doubt there will be a bearish reaction to the report data. But buyer interest may remain limited even if the report data is friendly, especially if soybean and wheat fail to get supportive news.

Soybeans: Soybean futures prices closed down 7 1/4 to 8 1/2 cents in the nearby contracts today. Meal futures were down $3-plus, and nearby soybean oil futures prices slipped about 10 points after reaching a seven-month high earlier today. Prices fell with global stocks as Trump administration officials are downplaying expectations regarding the possibility the U.S. and China will reach a trade deal by the March 2 deadline. A senior administration official is now saying that U.S. President Donald Trump and Chinese President Xi Jinping are “highly unlikely” to meet ahead of March 2, the deadline the two nations set for reaching a trade deal. The unnamed official also cautioned that the situation was fluid and that the status of the meeting could change after a U.S. trade delegation travels to Beijing next week. Economic Council Director Larry Kudlow also told Fox Business Network today that “There is a pretty sizable difference to go” before an agreement between China and the U.S. is reached.USDA did not confirm any new sales to China today, ending three days of sales announcements. In the prior three sessions, USDA announced nearly 3.8 MMT in bean sales to China. The total Chinese purchases are getting close to the 5 MMT pledged last week by China.  

Wheat:  Winter wheat futures prices closed 10 ½ to 13 cents lower in active trading. Spring wheat futures closed 6 ¾ to 8 ¾ cents lower. Slack demand for U.S. wheat on the world markets remains a bearish element for the wheat futures markets. European wheat futures fell to new two-month lows to add to pessimism that U.S. wheat export will improve. A stronger U.S. dollar index so far this week is further limiting buying interest in U.S. wheat. Much of the weakness was triggered by negative chart signals before a series of USDA supply and demand updates. That selling increased after news that Trump and Xi are unlikely to meet before a March 1 deadline to reach a trade deal. A bullish spark for price action could be the Friday morning USDA updates on 2018 final crop sizes, Dec. 1 inventories, winter wheat seeded acreage and global supply and demand updates. Pre-report trade survey estimates show U.S. winter wheat seedings will fall to 32.128 million acres from 32.535 million a year ago.

Cotton: Cotton futures prices dropped around a penny in the nearby contracts today, finishing near their daily lows and hitting near three-week lows. Cotton futures slipped overnight trading and then turned lower in response to the release of the weekly USDA Export Sales report this morning. The report for the week ended December 27 indicated the weekly total fell 39% from the crop-year high posted the week prior to 228,200 running (500 pound) bales. Shipments fell 8% to 189,900 bales. Sales for the 2019/20 crop year reached 32,200 bales, which was much better than the week prior, but still uninspiring. News reports late-morning that President Trump and Chinese President Xi Jinping likely won’t meet face-to-face before the U.S.-imposed March 1 deadline for a trade deal also likely added some pressure to the cotton market today, as the U.S. stock market dropped it its daily lows on that news.

HogsFebruary lean hogs today closed down 65 cents at $55.275. April and June contracts closed down $1.30 and 72 1/2 cents, respectively. Prices closed near their session lows today. U.S. President Donald Trump and Chinese President Xi Jinping are unlikely to meet before their countries' March 1 deadline to reach a trade deal, two U.S. administration officials and a source familiar with the negotiations told Reuters on Thursday. The news that the two leaders were now unlikely to meet spurred a sharp selloff in U.S. stocks and commodities, dashing the optimism that the countries were progressing toward a deal. Hog traders have been concerned about larger slaughter levels this year. Kills the first four days of this week were up an estimated 1.7% from a year ago. However, that is slower than the 2.9% increase seen during the first three days of the week.  Wholesale pork carcass values inched up 8 cents at midday on light sales. USDA reported net pork sales of 3,800 metric tons (MT) for 2018 and 29,300 MT for 2019 during the week ending Dec. 27. Much of the 2019 business was to China.

Cattle: Live cattle futures ended the session steady to modestly firmer, with the April contract up 2 1/2 cents at $127.175. March feeder cattle futures closed up 40 cents at $143.57 and the May feeders gained 52 1/2 cents. Cattle futures today followed the mixed trends in wholesale beef markets, where Choice fell 45 cents and Select was up 35 cents today, on movement of 76 loads. The market is looking for signs of stronger demand to support the cash market. So far, there has just been a light test at steady prices. The Fed Cattle Exchange online auction on Wednesday reported slightly firm trade between $124 and $124.50 on small sales totals. Packers still want to buy animals at lower prices.Cattle supplies should begin to seasonally slide, but it looks like there may be more than enough market-ready supplies this week with slaughter 7,000 head above a year ago.

Add new comment