New highs were scored again overnight before the morning drift.
Yesterday was another day of strength on the back of rumored potential purchases of US corn and soybeans by China. Thoughts that we could begin to see moves to revive Phase One as part of the negotiations between Trump and Xi will keep traders monitoring all developments, as it would be a major shift from earlier expectations of a trade disruption.
Traders will be watching headlines closely today for any sign President Trump and China’s President Xi are in contact with one another. They did not have a phone conversation that was originally planned. There has been little in the way of direct communication reported between the two countries since Trump placed 10% tariffs on all imports from China, effective Tuesday. In response, China placed tariffs on a handful of goods imported from the US, launched an anti-monopoly investigation into Google and Nvidia, and limited critical mineral exports. The response experts say is minor comparatively speaking. On Monday, Trump indicated he had planned to talk to Xi this week, something White House advisor Peter Navarro echoed. With talk China may be looking to offer up a return to the Phase One trade deal as a starting point, any signs the two have a positive call could help support the outlook. However, with President Trump’s recent push back on China’s presence in Panama, a quick resolution may not come as easy as many may hope.
All eyes will be focused on what happens between Trump and Xi, if anything does today. We are also watching a continued escalation in the Black Sea, with questions on what the suspension of USAID will mean for agriculture in Ukraine this year. Ukraine has seen the benefit of aid to help in production agriculture in competition with the US. Corn and wheat are stronger this morning, with beans trading on both sides of unchanged. The dollar is lower again, with crude also testing support.
Portions of Argentina’s growing areas are seeing some much-needed rain this morning, with more in the forecast. Some of the recent moisture was under-forecasted, giving producers a welcomed surprise that has helped to stabilize conditions in certain regions. Temperatures are expected to moderate in the coming days as well, helping to remove what locals had seen as the worst-case scenario. It is interesting to note, the uncertainty over production potential as well as a lack of clarity in the rules, has kept farmer selling in Argentina slow, even after the announced roll back of export taxes. The 15 cents added to a bushel of wheat or corn and 80 cents added to beans is a good start in the eyes of producers but has done little to incentivize selling.
In Brazil, harvest is still delayed across large portions of the central and northern regions, though weather is expected to improve again this week to allow progress. While in Parana, less in the way of heavy rain has allowed producers to harvest and plant corn relatively close to the average pace, we are seeing major delays in Mato Grosso, where only 6% of the safrinha crop is planted, 23% behind last year’s pace. With more in the way of heavy rain possible next week, the situation will need to be watched closely in the weeks ahead.
Live and feeder cattle futures continued to see technical selling on Tuesday with a steady soft outlook this morning. Negotiated fed cattle remain at a standstill as packers fail to show any interest as the CME falls while asking prices in the South were quoted steady on the week at $208. The outlook for this week’s no better than steady, with $1-3 lower possible. Box beef values give up Monday’s game with choice down $1.26 and select box falling $2.43.
We have now seen April cattle fall more than $9 since last week’s high and feeder cattle almost $12. Both markets are off a long way quickly and are becoming oversold. Last week’s COT report showed that funds held a record large net long position now and near record length in the feeder cattle market. Both markets could still fall further as technical liquidation has nothing to do with cash outlooks. Support for March feeders occurred yesterday in the 267-269 range, but if this were to be violated on a closing basis then the 50-day moving average for March feeders at 263 will be the next target. April live cattle have major support at 194-195 if the low at 197.40 gives way.