Grains are slightly higher on Thursday morning, with livestock seeing significant pressure.
Light Follow Through Buying After China Rally
Darin Newsom, senior market analyst with Barchart says grain markets are just slightly higher after the rally in soybeans on Wednesday tied to President Trump’s social media post.
President Trump confirmed Thursday that he’ll be meeting with China’s President Xi in four weeks at the APEC summit and soybeans purchases will be a major topic during their meeting, vowing to “make soybeans, and other row crops, great again!”
Newsom says the markets got overdone with their enthusiasm about a possible deal with China as he doesn’t see an agreement being reached between the two countries and even if it is it won’t be worth the paper its written on in his opinion.
No USDA Data
The government is shut down for a second day and so are no reports from USDA, including weekly export sales or flash sales.
Could China Buy Soybeans Under the Radar?
In 2018 the government shutdown allowed China to come in and buy soybeans from the U.S. without being detected.
Newsom says that is entirely possible but he adds that those would only be fill in business since China has bought and continues to buy most of its soybeans from Brazil and Argentina.
He points to the recent purchases China made from Argentina after they dropped their export tax.
What is the Grain Market Trading With No USDA Data?
Newsom says the market doesn’t like uncertainty with the void of news but will have to rely on the standard market signals coming from futures spreads and basis levels.
Right now he says the market is telling producers that with the weak basis and inverted spreads that there are ample supplies and the market does not need any bushels or at least end users have no urgency to buy.
Basis and Spreads Signaled the Extra Corn Bushels in the Quarterly Stocks
In fact, the futures spreads and basis levels indicated prior to the USDA Quarterly Stocks Report that there were additional old crop bushels above and beyond USDA’s ending stocks projection of 1.325 billion bu.
However, he says there could have also been some new crop bushels that were intermingled into the inventory count.
What is Gold Telling Us?
The gold market continues to hit record highs and Newsom says that market is trading the uncertainty of the government shutdown.
However, even prior to that it was hitting record highs on inflation fears, plus lack of confidence in the government.
Cattle Lower Following Cash and Cutouts
Cattle futures are seeing big losses early Thursday as funds are liquidating.
The lower cash trade in the North this week at mostly $360 dressed, down $5, and boxed beef values slipping further have also drug down the market.
