Grain and livestock futures closed mostly lower on Friday.
It was a disappointing close considering the news that top trade officials from the U.S. and China were meeting in Geneva this weekend to de-escalate the trade war.
Dave Chatterton, Strategic Farm Marketing, says the markets faded the news as the realization set in that no major breakthroughs in the trade talks are expected and a long term trade deal with China could take quite some time.
President Donald Trump also said Wednesday he’s unwilling to preemptively lower tariffs on China in order to unlock more substantive negotiations with Beijing on trade.
Weather was also a headwind for the corn and soybean markets with fast planting pace and more rain in the forecast for dry areas of the hard red winter wheat belt.
The market is also positioning ahead of the May WASDE and USDA Chief Economist Seth Meyer has confirmed they will start to consider the impact of tariffs in the new crop balance sheets.
“That could make these early estimates look a bit too friendly,” says Chatterton.
July corn made new lows for the move hitting chart resistance, failing and then testing triple bottom support on the charts at $4.51.
“It was a big outside day lower,” explains Chatterton, “And so tomorrow’s action will be important to see if there is further technical breakdown.”
Wheat has been an anchor for the corn market with improving crop conditions tied to recent rain.
Lower prices relative to corn are pushing wheat into the feed ration.
The higher dollar and lower crude oil markets were also bearish for the grain complex.
The FOMC meeting concluded with the Fed holding interest rates steady at 4.25% to 4.50%, as widely expected.
However, Chatterton says Fed Chair Jerome Powell said the labor market was solid and inflation was still somewhat elevated, but the uncertainty in the economic outlook moving forward tied to tariffs.
Cattle futures saw a correction off of Tuesday’s new contract highs, despite higher cash trade.
So far business in the South, has ranged from $218 to $220, steady to $2 higher, with $219 paid on Wednesday.
So is this divergence a concern?
Chatterton calls it a healthy correction in a bull market that continues to be supported by cash and consumer demand with Choice beef values at two year highs.
Lean hogs also had a disappointing day, also fading at least slight progress on trade with China.
