Trade Tariffs Set For July 6 - Sell Rumor Buy Fact?
Jun 18, 2018
Good Morning! From Allendale, Inc. with the early morning commentary for June 18, 2018.
Grain markets are oversold after nearly 3 weeks of straight down price, lead by soybean complex. Funds have reduced long positions. With tariff war parameters set, grain traders will likely begin focusing on weather conditions and June 29 planted acreage report.
Beijing will impose an additional 25 percent tariff starting July 6 on 545 products from the United States including soybeans, corn, wheat, orange juice, whiskey, lobsters, salmon and cigars, according to the Ministry of Finance. The tariffs are focused on President Trumps key supporters.
World Weather Inc. says, “The bottom line for the United States will be mostly good because4 of widespread rain in the coming ten days. Greater rain is still needed in West and South Texas, but improvements are expected to result briefly from weekend rain and that which is expected in the next few days.” China’s weather is looking favorable for most of the nation’s crops, but there will be need for greater rain in the Yellow River Basin and portions of the North China Plain.
US Crop conditions report this week could have corn good/excellent at 76 to 77% which is unchanged to down 1%, the average is 72%. Soybeans could be 73 to 74% good/excellent versus last week 74% and 65% average.
CFTC Commitment of Traders report showed managed money funds reducing their net long position by 77,383 in corn, 59,429 in soybeans and 1,383 in wheat last week. However, they are now net long 36,216 corn, 12,870 soybeans and 14,903 wheat.
Funds on Friday were estimated net sellers of 6,000 corn, 16,000 soybeans, 3,500 wheat, 6,000 soymeal and 7,000 soyoil contracts.
Kansas wheat harvest is moving along, yields are down but quality is good. Test weights are coming in at 60 to 62 pounds. Kansas is the US leading wheat producer state with a forecast from USDA of 270 million bushels, down 19 percent compared to a year ago.
Cattle production was estimated by USDA at 654,000 head last week. This is the third largest weekly production of the year. On the positive end, it was 2.4% over last year. That is better than the past six weeks that averaged 5.5% over last year. Beef production, slaughter x weights, came to 519.4 pounds per head which would be 1.5% over last year.
Managed money funds were net buyers last week of 9,278 in live cattle and 5,045 in lean hogs. They remain net short lean hogs of 4,153 and net long 23,271 live cattle.
June live cattle put in a large outside day on Friday but closing in consolidation range. Resistance is 106.76 and support at 100.40. Chartist will be looking for a close outside this range to prices further in the direction of the breakout. Cash prices remain at a premium to futures providing support on selloffs in futures.
Hog production for the week came to 2.215 million head according to USDA’s weekly packer survey. Smaller than expected supplies, at the time of year with the smallest supplies is looked at as positive. The run was 1.7% over last year while the previous six weeks averaged 2.9% over last year. Pork production of 470.4 million pounds was estimated. That would be 3.8% over last year and over the past six weeks of 2.7%.
July lean hog futures closed 1.00 higher for the week and is trading with in the 80.00 and 83.00 range. Trade agreements and retaliatory tariff concerns has pork traders on edge. Supplies are tightening as summer heat reduces gains. Look for choppy action this week.
Dressed beef values were mixed with choice down .49 and select up .76. The CME Feeder Index is 141.02. Pork cutout value is up 1.69.