U.S. Trade Tensions Continue

Published on: 06:38AM Dec 03, 2019

Good Morning from Allendale, Inc. with the early morning commentary for December 3, 2019.

Grain markets are mixed overnight with corn futures were supported by technical buying and some fund short covering.  Soybeans are watching South American weather and trade conflicts with China, Brazil, and Argentina.  Wheat futures are trying to rebound from yesterday's profit taking after reaching a six-month high at the end of last week.

USDA weekly crop progress report showed corn harvest rating at 89% complete (89% expected, 84% complete last week, 97% last year, 98% 5-year average).  North Dakota only 36% complete (95% 5-year average).  Soybean harvest rating at 96% complete (97% expected, 94% last week, 97% last year, 99% 5-year average).

President Trump ambushed Brazil and Argentina, announcing tariffs on U.S. steel and aluminum imports from the two countries in a measure that surprised South American officials and left them searching for answers.  President Trump said the tariffs, "effective immediately," were necessary because "Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers.”

CFTC Commitments of Traders showed funds new net position short -116,072 corn contracts, short -42,941 soybean contracts, long +10,475 wheat contracts, long +81,657 live cattle contracts and short -860 lean hog contracts as of last Tuesday (data delayed due to the Thanksgiving holiday).

President Trump told reporters China wants to make a trade deal with the U.S. but said we will see what happens.  Various news sites reported the deal was stalled because President Trump signed legislation last week backing Hong Kong protesters.

USDA weekly grain export inspections recap for the week ended 11/28/19 showed corn exports at 429,000 tonnes (expecting 500,000 – 700,000 tonnes), soybean exports at 1.548 million metric tonnes (1.4 – 2.0 mmt) and wheat exports of 247,000 tonnes (400,000 – 600,000 tonnes).

Two top U.S. officials said a Phase One deal could still happen this year depending on China's actions.  U.S. Commerce Secretary Wilbur Ross said a 15% U.S. tariff on about $156 billion worth of Chinese imports is set to take effect Dec. 15 as a natural deadline and said time was running out for China to avoid it.  "If nothing happens between now and then, the president has made quite clear he’ll put the tariffs in," Ross added.

Ukraine increased its grain exports 32% to 24.8 million tonnes this season helped by higher wheat and corn exports, the Economy and Ag Ministry said.  Wheat exports rose to 13.5 million tonnes (9.4 million tonnes last year).  They also exported 3.5 million tonnes of barley and 7.5 million tonnes of corn.

China's pork prices rose yesterday, the first significant rebound in more than a month, as consumption increased with colder weather while supplies remained short.  After prices topped 52 yuan ($7.39) per kilogram, prices unexpectedly plunged 20% last month as consumers cut back on pork and more supplies of frozen pork were released to the market.

Dressed beef values were higher with choice up .49 and select up 2.64.  The CME feeder index is 144.97.  Pork cut-out values were up 1.01.