Market Cheers Trade Deal

Published on: 07:59AM Dec 13, 2019

Good Morning from Allendale, Inc. with the early morning commentary for December 13, 2019.

Grain markets are higher on optimism that a trade deal between the U.S. and China may finally be at hand. General trade influences today will also include economic data and U.K. election results as traders try to envision how next year's markets will look.

Weekly export sales reported corn sales of 875,938 metric tonnes (873,525 for 2019/20). That was over the 400,000 – 800,000 trade expectation. This week’s old crop sale was the fifth largest for this specific week of the past 10 years. The past four weeks of new sales averaged 29% under last year. Wheat export sales totaled 502,674 metric tonnes (all 2019/20). This was over the 200,000 – 450,000 trade range.

Soybean export sales totaled 1,175,138 metric tonnes (all but 125,000 was 2019/20). This was over the 500,000 – 1,100,000 trade range. Chinese buyers showed minimal interest this week (241,550) just like last (298,617). However, these numbers are good through Thursday (before the Thursday night Chinese announcement). They now have 9.847 million tonnes booked. There is another 3.163 booked under the “unknown” moniker. China now has 13.010 million tonnes booked as of the 5th. The current number, including new recent sales, now likely has us over the 13.3 million tonnes sold last year to China.

Yesterday's overnight sale of 1.074 tonnes to Mexico and 110,744 to unknown could be the long-awaited start of the US export sales season. Currently, US corn is almost $30 per metric tonne cheaper than Brazil ($0.76 per bushel).

Abiove estimates that Brazil's soybean exports could reach 75 million tonnes next year due to a smaller U.S. crop which would shift demand to Brazilian suppliers. If true, Brazil will export an additional 3 million tonnes of soybeans next year compared with 2019 according to Abiove's calculations.

The United States has offered to cut existing tariffs on Chinese goods by as much as 50% and suspend new tariffs scheduled to go into effect on Sunday in an attempt to secure a "Phase One" trade deal. U.S. negotiators have offered to reduce tariffs on about $375 billion in Chinese goods by 50% across the board, two people familiar with the negotiations said on Thursday, and suspend tariffs on $160 billion in goods scheduled for Dec. 15. (Reuters)

Election results out of the United Kingdom show a clear win for Boris Johnson and Conservatives. Johnson has pledged to move forward with Brexit by January 31st as his party wins reelection.

Retail Sales kick off the economic events out today at 7:30 AM CST. Export & Import prices will also be released at that same time, and Business Inventories are due at 9:00.

Weekly pork exports sales were strong at 29,166 metric tonnes. This was 31% over last year. Year to date sales come to 1,734,167 metric tonnes which is 38% over last year. There was a moderate interest in 2020 delivery, 15,562 tonnes. China’s government issued special no-tariff import permits Thursday night. Today’s sales only cover activity through Thursday.

Cash hogs continue their slow ascension from the year's lows. The Iowa/Minnesota regional report posted a low of 41.25 for its negotiated estimate on November 25. Wednesday's trade was noted at 48.26.

Cash cattle traded yesterday at $119 in Kansas and Texas. Bids in Nebraska were at $119 live and $188 dressed. As a whole, prices are expected unchanged with last week's trade.

Dressed beef values were lower with choice down 3.00 and select down 1.16.  The CME feeder index is 143.31.  Pork cut-out values were down 1.53.

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