Corn: Down 8 to 13 cents
Soybeans: Down 21 to 25 cents
Wheat: Down 5 to 8 cents
General Comment: U.S. grain and soybean markets, global stock markets and commodities in general are under sharp pressure after U.S. President Donald Trump raised the risks for no China trade deal. Trump on Sunday dramatically increased pressure on China to reach a long-sought trade deal by announcing he will markedly increase U.S. tariffs on certain Chinese goods and a 25% tariff will be applied to an additional goods if a trade deal is not reached this week. The good news is that Ministry officials in Beijing said a delegation still planned on travelling to Washington for talks, but it is unclear whether Vice Premier Liu He would attend, or even whether China would be willing to negotiate with a gun to their heads.
Doubts around the ability of US Trade Representative Robert Lighthizer and Liu to close a deal emerged last week, when Myron Brilliant, the US Chamber of Commerce’s head of international affairs, suggested the Chinese side is balking on providing any assurances that they would cut back on subsidies provided to state-owned firms. “We’re likely to get language that … touches on transparency, but we’re not likely to get the commitment that we want from the Chinese, in terms of they’re really cutting back and eliminating subsidy practices, not just in the steel and aluminum sectors but in a range of sectors,” Brilliant said. Lighthizer has expressed concern with the use of subsidies in Beijing’s “Made in China 2025” industrial policy initiative that seeks to create global leaders in a range of cutting-edge hi-tech industries at the expense of the US and other developed countries. Subsidies and Made in China 2025 formed part of the top trade envoy’s justification for starting punitive trade action against Beijing.
Taoran Notes, a social media account used by Beijing to release trade talk information and to manage domestic expectations, said the hints from the US side that this week’s 11th round of talks are a deadline is merely a trick “to increase tensions and generate pressure on the other side.”
Also, US House Chairman Collin Peterson indicated over the weekend that he was pessimistic that USMCA trade deal would be passed this year. The trade treaty might not even make it out of the House Ways and Means Committee – the committee that is responsible for US trade policy. US steel and aluminum tariffs persist and remain a problem for Canada and Mexico to ratify the deal on their ends.
The May USDA Crop Report this Friday will provide a new crop starting point to U.S. and global supply and demand for the 2019-20 season and updates on this season. The monthly report will take a back seat to the latest round of China trade talks.
Friday’s weekly CFTC Commitments of Traders report showed that managed money was net short 83,500 contracts of Chi wheat, up 15,500 contracts; short 307,000 corn, down 15,000 contracts; and short a record 148,500 soybean futures and options, up 19,000 contracts. When combining fund managers’ net positions in CBOT corn, wheat, soybeans, soybean meal, soybean oil, along with HRW and spring wheat, the overall net-short reached 683,501 futures and options contracts as of April 30, up from 656,078 a week prior, which was the previous record
An active weather storm pattern with storms this week will produce near to above-normal Midwest precipitation into May 12. Notice that additional above normal rains of .75-3.50” are forecast for a broad area of the western and northern Midwest and the Delta which will accentuate their flooding woes. The eastern Midwest will see rains of .50-1.75” which will be enough to keep planting slow or halted. The big area of concern is east Texas and Louisiana into the lower Ohio River Value where widespread flooding is likely from 5 to 8 inches of rain and all the water that is shifting southward from the flooded Midwest. There may be a 4- to 6-day drier period after May 11 with rains returning by the middle of the month. Temperatures will average 6-12 degrees below normal over the next 14 days across the Northern Plains and Midwest. Midwest high temps will range from the 50’s into the low 70’s with lows in the 30’s and 40’s. The chill will retard soil moisture evaporation and germination rates.
The daily USDA export report for large sales did not report any new business this morning.
Corn market gapped sharply lower overnight on worries about a failed China deal, falling below last week’s low at $3.58 ½ and the 20-day moving average. Prices have recovered about 5 cents but have slipped back below the opening at $3.59 ½. That is the pivot point today with key resistance starting at Friday’s low at $3.66. and then Friday’s high at $3.71 ¾.
Soybean seen sharply lower after leaving a downside gap on the daily July futures chart between Friday’s low at $8.40 ½ and the overnight high at $8 31 ¾. Futures seen opening near the session and contract low at $8.17 this morning.
Wheat futures also gapped lower overnight and held above last week’s contract low at $4.26 in the July SRW futures contract. The July contract would need a close back above the gap from $4.38 to $4.33 ¼ to turn the chart positive. Prices were trading above their opening at the close of overnight trading. Tender activity shows Ethiopia seeks up to 600,000 metric tons (MT) of optional-origin wheat, Jordan seeks 120,000 MT optional-origin wheat, while South Korea bought 75,000 MT U.S. wheat and Taiwan bought unknown quantities of Black Sea feed wheat.
Hogs: Sharply lower
Cattle futures marched lower last week albeit at a slower pace than a week earlier as each intraday rally continued to attract fund long liquidation. Wholesale beef prices fell Friday, extending the weekly decline to $5.78 for Choice cutouts as Select dropped $6.29.
Hog futures seen sharply lower on fears the U.S./China trade talks may end this week without an accord. The national average cash hog prices fell 6 cents on Friday and down 68 cents for the week. Slaughter rose to 2.382 million head from 2.341 a week earlier. Wholesale pork prices fell $2.26 last week to 82.01, the lowest weekly close since April 12. Pork sales were sluggish last week and that will need to change to put a floor under pork and cash hogs.