Pres. Trump and Pres. Xi of China break bread. Optics occur today.
Grain Overview
The night grain trade was mostly supportive after an initial lower start when it was announced the trade deal with China will only run for two months (Nov. 10 to Jan. 10) and then have to be renewed. The knee-jerk reaction lower was quickly snapped back up. China wanted a 1-year extension, but the US held at 2-month to make sure they comply with soybean purchases and additional $17 Bil Ag purchase pledges by December 31.
Cash markets remain strong as harvest is slow enough that farmers are not being overrun with bushels, keeping movement into commercial storage minimal so far. Given the recent expansion to on-farm storage and a smaller crop, many farmers may not need to make deliveries out of the field. This will leave processors with forward-contracted deliveries, and these may not be enough to maintain production. Processing margins are improving, encouraging buyers to push even more for coverage.
It’s because of the slow harvest that soybeans remain well supported, as soybean meal is in an aggressive uptrend, again making new annual highs overnight. Trying to secure soybean meal in central Illinois is difficult now, with quotes $12/ton higher than last week. It’s possible the USDA made last year’s soybean crop too large (and this could get revealed on the September 30 Stocks Report), with such regional tightness being thrown upon crushers. Considering yield risks as mature soybeans have split pods developing, this only exacerbates the current crush problem.
Few export sales were announced in the flash system over the past week, and this weekly sales report will likely reflect weaker totals. Current ethanol margins are $0.40/gal, while the bean crush is showing profits averaging $2.35/Bu.
Today’s main point of interest will be the meeting between President Trump and President Xi and any trade deals that may come of it. Most talk is focused on technology and rare earth minerals, but hopes are we will see ag sales as well, with several hoping for corn sales to be announced.
Heavy rains will return to the Plains and Western Midwest. Over the next week, 3-6.50” of rain is forecast to run from eastern Nebraska up through western Iowa and eastern North Dakota. With the rain falling on already saturated soils, mud has become one of the concerns, along with the mature soybean pods that can split and drop their bean seed. Corn lodging is not going to help move harvest along quickly either.
Corn continues to hold in a sideways trading range, with support in the 524-528 range and resistance sneaking in above 534 while harvest is absorbed. Soybeans are poking the bear again this morning, pun intended, as beans again remain hopeful of something positive from the Chinese trade summit, with prices within eight cents of contract highs this morning. Meanwhile, wheat flounders, seeking a low, as Chicago wheat bounces above 7.00. More news is out this morning that Ukraine and Russia have been invited to New York for talks while they continue to bomb each other aggressively.
Cattle Overview
Yesterday’s cattle trade lept sharply higher and captured back Tuesday’s losses, while feeder cattle did the same and attracted interest on top of that. New stories are circulating that Pres. Trump is being bombarded with requests to roll back the tariff-free beef because of struggling support for Midwest politicians. As of this morning, there is still no confirmation that Pres. Trump will pull back on the additional 300,000 MT of tariff-free beef trimmings. The talk is legitimate, with some White House officials reportedly discussing scaling the program back, while USTR remains opposed. For now, nothing has changed, and the imports remain in place through November 30.
Yesterday’s excitement may get checked today, as yesterday afternoon’s boxed beef price was disappointing, with Choice coming down $1.58 and Select dropping $5.51. A positive note, though, is there was some light cash cattle trade Wednesday that was reported steady with last week at $350 dressed.
The port opening of Santa Teresa, New Mexico, is on line for today, with initially 700 head/day being expected, eventually growing to 1,500 head/day within a month. Today is the last trading day for September feeder cattle, and yesterday the index came together as it was down $1.76 at $336.98.
The trend higher this week after last week’s friendly Cattle on Feed report still remains in place. December cattle are likely to struggle at 222.50-223.00, but look to soon target last week’s highs near 225 after some congestion.
November feeder cattle are the high-volume active contract and have renewed resistance at 331-333. If any hiccups occur at Santa Teresa, similar to Douglas, Arizona, this can cause a pop to major resistance, which is in place on the continuation charts at 340-343.
There is a September Hogs and Pigs report out this afternoon at 2:00 p.m. Estimates are for Inventory, Kept for Breeding and Kept for Marketing numbers all at 99%.