Despite Progress, The Big Trade Deal Remains Elusive

Published on: 03:42AM Dec 05, 2019

Good Morning from Allendale, Inc. with the early morning commentary for December 5, 2019.

Grain markets were mixed overnight as traders weigh the latest estimates for next week's USDA report, South American weather, trade headlines, and this morning's export sales report.

Weekly export sales will be released this morning at 7:30 AM CST. Traders anticipate seeing wheat sales of 300,000 to 700,000 tonnes, corn 500,000 to 900,000, soybeans 700,000 to 1,300,000, soymeal 100,000 to 300,000, and soyoil 5,000 to 25,000.

Estimates for next week's USDA Supply and Demand report were submitted to newswires yesterday. Allendale estimates 2019/20 corn ending stocks at 1,950 million bushels, soybeans 475 MB, and wheat at 1,004 MB. Production changes are not expected. The report will be out Tuesday December 10th at 11:00 AM CST.

Ethanol plants are responding to strengthened margins. Production last week averaged 1.060 million barrels per day. That was 0.8% under last year.  We now have three weeks in a row that are operating under a different production regime. The past three weeks have run from -0.9% to +1.0%.

IEG Vantage (formerly Informa) estimates Argentina's 2019/20 corn production at 46 million tonnes and the soybean crop at 52.5 million tonnes. Brazil's 2019/20 total corn production is estimated at 103 million tonnes, while their soybean crop is estimated at 124.5 million tonnes.

U.S. President Trump said on Wednesday that trade talks with China were going "very well," sounding more positive than on Tuesday when he said a trade deal might have to wait until after the 2020 U.S. presidential election. (Reuters)

Both houses of Japan’s Parliament have now approved a trade deal with the United States which will go into effect on Jan. 1, 2020. The following statement may be attributed to American Farm Bureau Federation President Zippy Duvall: “Now that the final hurdle to a deal with Japan has been cleared, American farmers and ranchers can count on increased market access for their products – from beef and poultry to fruits, vegetables and nuts.

This week's Oklahoma City sale barn action had 725# Med/Lrg 1 steers averaged $148.33. That is still under the $150.11 peak from the second week of October.

Fed cattle futures were lower partially on the disappointing ADP employment survey yesterday. Private market employment ran +67,000 in November. That was the lowest in six months. The trade expectation was for +140,000. Cattle don't always follow economic indicators, however.

Russia will impose restrictions on beef supplies from five plants in Argentina and two plants in Paraguay starting Dec. 18, the ag watchdog said due to findings of ractopamine in some shipments.

Based on our hog slaughter estimates for today, tomorrow, and Saturday's processing we are currently expecting a 2.794 million head run this week. That would surpass the two weeks before Thanksgiving that were themselves new all-time records (2.758 and 2.761).

December hog futures are getting closer to the coming expiration on the 13th. Today's Lean Hog Index, the measurement of nationwide cash hog prices, will increase to 58.20 on today's CME Group release. That is good through Tuesday's cash hog trading.

Dressed beef values were lower with choice down 3.20 and select down 2.00.  The CME feeder index is 145.19.  Pork cut-out values were up .39.