U.S. – China Trade Deal in Sight

Published on: 07:00AM Nov 04, 2019

Good Morning from Allendale, Inc. with the early morning commentary for November 4, 2019.

Grain markets remain in tight trading ranges as harvest selling pressure has weighed on the markets over the last few weeks, excessive rains and early snowstorms have delayed harvest in the northern growing states.  Traders will continue to focus on weather maps and any indication on what the USDA will show on this Friday’s WASDE report.

Last week, December corn futures were up 1.75 cents, January soybeans up 2.25 cents, December wheat down 3 cents, December soymeal was up $0.60 and December soyoil was up 9 points.

U.S. farmers are likely to expand plantings of both corn and soybeans while reducing wheat seedings for the upcoming marketing year, the USDA said.  The USDA's Office of the Chief Economist forecast farmers will seed 94.5 million acres of corn in the 2020/21 crop year (89.9 million for 2019/20). For soybeans, acreage will rise to 84.0 million acres (76.5 million last year).  All-wheat plantings for 2020/21 at 45.0 million acres (45.2 million acres in 2019/20).

USDA weekly crop progress report will be released today at 3 p.m. CST.  Trade is looking for corn harvest rating at 58% complete (41% complete last week, 74% last year, 77% 5-year average).  Soybean harvest rating at 77% (62% last week, 81% last year, 87% 5-year average).

CFTC Commitments of Traders showed funds new net position short -85,337 corn contracts, long +72,325 soybean contracts, long +5,042 wheat contracts, long +40,467 live cattle contracts and long +13,840 lean hog contracts.

USDA September soybean crush report showed crush at 162.3 million bushels (expected 161.8 million, 177.5 million last month and 169.3 million last year.  Based on the USDA's 2.120 billion bushel annual crush estimate, October-August crush will need to total 1.958 billion bushels (1.923 billion last year during the same time period). Soybean oil production in September was 1.901 billion pounds (2.048 billion last month, 1.937 billion last year).  The September soybean oil yield rose to 11.71 pounds (11.55 last month, 11.44 last year).

The Trump Administration said the U.S. aims to sign “Phase One” deal this month (possibly in Iowa).  China’s Xinhua News Agency said U.S. and China had reached a “consensus on principles” during Friday’s phone call.  Both Kudlow and Ross expressed optimism regarding “enormous progress” is being made and said “Discussions will continue at the deputy level”.

The U.S. and China are on a good path to complete the first part of a trade agreement, but two additional phases will be needed to address all of China's "structural deadly sins," White House trade adviser Peter Navarro said.

U.S. private exporters reported the sale of 132,000 tonnes of soybeans to China on Friday.  The deal, which calls for delivery by August 31, brings China's total U.S. soybean purchase commitments to 6.322 million tonnes for the marketing year (last year during the same time China had purchased 16 mmt).

Last week’s cattle run was estimated at 655,0000 head according to USDA’s weekly report (650,000 estimated). This was the largest kill in six weeks. Beef production last week increased to 537.5 million lbs. (estimated 0.1% under last year). The previous four weeks averaged 0.4% over the previous year.

Dressed beef values were higher with choice up 1.02 and select up 1.02.  The CME feeder index is 145.98.  Pork cut-out values were down 0.41.