Grain markets ended lower on Monday. Cattle futures were limit down, with hogs higher.
Soybeans Fade China News, Wants to See Actual Sales
Soybeans ended slightly lower again on Monday fading confirmation of another sale of 4.5 million bu. of sales to China as well as talk that President Trump and Chinese President Xi had a phone call confirming additional meetings on trade.
However, Dave Chatterton with Strategic Farm Marketing says the market is tired of rhetoric and wants to see results in the form of sales. “We had another two cargoes announced this morning or confirmed to China that were sold. The trade sees that as part of the business that was done last week and new business looks like it’s pretty slow or nothing happening on that front here at the moment.”
Time is running out for the U.S. to make soybean export sales to China before the Brazilian crop comes on line. So far the trade has projected around 3 MMT of purchases have been made by the Chinese but that is still only a quarter of the business promised. “I think the price action here tells you that, you know, it’s not going to be just talk at this particular point. We’re going to need evidence of more sales coming down the pike. And there’s also some tension on that trade front between the U .S. and China as it relates to Taiwan. Japan is involved in that discussion as well,” he adds.
Trump and Xi Talk
President Trump and Chinese President Xi Jinping on Monday held their first talks since agreeing to a tariff truce last month. Trump said the telephone call was “very good” and that the leaders spoke about purchases of soybeans and other farm products as well as curbing shipments of illegal fentanyl, as reported by Bloomberg. Trump said he agreed to visit Beijing in April, and that he had invited Xi for a state visit next year.
“We did have, as you mentioned, kind of a surprise here that the White House announced that President Trump and President Xi had held a phone call this morning. Ag was certainly part of what they talked about. We had President Trump putting out a Truth Social post saying that, you know, soybeans were part of that discussion.”
Soybeans See Poor Export Inspections
The other problem is soybean export inspections came in at 29.4 million bu. but the total shipments are at only 402 million bu. which Chatterton says is 45% behind last year’s pace. And the window to export to China before Brazil’s crop is available is quickly closing. “If you put a five to six, seven week transit time and placement time on new sales here to China, you’re talking about late Jan and into February. And right now those February offers out of Brazil on beans, about a 90 cent provisional discount to what we can originate from the U .S. Gulf. So the math on that is questionable,” he says.
Corn, Wheat Drift on Light Holiday Volume
The other problem for soybeans, but also corn and wheat is it is a holiday week and many traders have exited positions so volume is light. That combined with first notice day on Friday means long positions in the December contracts of corn and wheat need to be liquidated or rolled by Wednesday or they could face delivery. So that is also contributing to the grain markets drifting or at least seeing a lack of fund buying.
Grains Right at Chart Support
Soybeans, corn and wheat are all testing chart support and Chatterton says last week’s lows will need to hold or there could be more technical selling and liquidation. That may be easier to accomplish with the lack of news and the light volume around the holiday. “Technically, again, you’re in a situation where because of a thinner holiday trade and as we get into the end of the end of the year here,” he says.
Cattle Limit Down
Live and feeder cattle futures closed limit down on Monday in reaction to the closing of Tyson’s Lexington, Neb. facility on Jan. 20 and the downsizing of the Amarillo, Texas plant. Chatterton says the futures will be under expanded limits on Tuesday but the synthetics indicate only about a $2.00 lower price in cattle to allow those wanting to exit to get out of their long positions.
Hogs See Short Covering, Spread Unwinding
The lean hog futures were the only market that was higher on the day. Hogs saw short covering and spread unwinding with cattle as the main features. Chatterton says after seven lower weekly closes the market is technically beat up and oversold and due for a correction.
