CORN HIGHLIGHTS: Corn futures ended the day mixed with nearby Dec losing 3/4 cent, closing at 3.66-1/4, the final closing price for the Dec contract. Mar gained 3-1/4 closing at 3.81, its highest close since the first week of December. New crop Dec closed 2 higher at 3.95-1/4. Firmer beans and wheat provided underlying support. The corn market got off to a strong start in the overnight and morning sessions, trading as much as 7 to 8 cents higher on continued positive developments in U.S. negotiations with China, as well as the signing of the USMCA accord this week. The latest wording indicates that China will purchase $32 billion over the previous level of agriculture purchases to average $40 billion per year with a goal of working toward $50 billion. Mexico’s large purchase yesterday may have been in response not only to the signing of the USMCA but corn prices losing 30 to 40 cents since mid-October. Harvest continues to plug along but it is not sure how much corn will be left in the field for spring harvest.
SOYBEAN HIGHLIGHTS: Prices finished firmer for the second consecutive week and for the ninth time in ten sessions. Very good news from the trade relation front with China proved a boost for prices today as futures finished with gains of 9-1/4 in Jan, closing at 9.07-1/2 and next Nov up 7-3/4, closing at 9.51. The 50-day moving average acted as overhead resistance. Bullish traders argued the market is gaining upward momentum while bearish traders will argue that today’s positive news and expectations that China will spend at least an average of $40 billion the next two years in agricultural goods and perhaps up to $50 billion was viewed as supportive but didn’t do a whole lot for the market after the news was released and prices peaked. The bearish trade would argue that Jan beans reached a high of 9.17 and the close at the end of the week at 9.07-1/2 might be a disappointment. We don’t view it that way. We view that the global picture looks more supportive and that China is negotiating with the U.S. in a broader sense and agriculture is a key linchpin to creating long-term relations. Additionally, we believe that the hog herd in China will be on the rebound in the year ahead and a need for continuous ag products to meet a growing herd would become more paramount.
WHEAT HIGHLIGHTS: Wheat futures finished quietly with Dec Chi going off the board at 5.39-1/4, unchanged. Back months were 1 to 2 cents higher. KC wheat finished mostly steady while Mpls gained 2 to 5-1/2 cents. Like the other ag markets, wheat was volatile today on good but uncertain news as agreements with China seemed to be reached. The ratification with USMCA this week was also viewed as supportive and helped provide underlying support for wheat prices as futures gained 2-1/4 cents on Mar Chi. In principle, it looks as though China will purchase an average of $40 billion of agriculture goods over the next two years with a goal of $50 billion. This is a substantial increase from a historical perspective.
CATTLE HIGHLIGHTS: Cattle markets posted sharply higher closes today, beneficiaries of the U.S./China trade deal announced today. Dec live cattle closed 1.95 higher to 122.37, Feb lives were up 2.45 to 127.55, and Apr lives were up 2.00 to 128.20. Jan feeders were up 3.12 to 145.67 and Mar feeders were up 2.80 to 146.25. Choice beef values closed 3.00 lower yesterday afternoon to 215.65, their lowest value since October 10. Choice beef has moved lower for eight sessions in a row and for a total of 16.96. It is also down 26.69 from its peak on November 13. Choice cuts were up this morning 1.39 to 217.04 on hopes for a surge in exports to China. Cash cattle traded in Kansas yesterday at an average price of 118.85 vs last week’s trade from 118.00 to 119.50. Cash cattle traded in Nebraska yesterday at 118.50 vs last week’s trade of 118.00 to 120.00. By this afternoon, cash cattle had begun to trend higher, with 1,300 head sold in Iowa at 120.00. Price action in the grain markets today was somewhat disappointing given the positive trade news with China, but cattle markets were able to hold onto gains through the end of the day. Since China will need to buy additional agricultural goods with the new deal, American beef seems like a prime target for Chinese buyers. Not only is there a massive protein shortage in China currently, but expensive beef is practical in meeting dollar amount commitments. Feb lives made new contract highs today, trading as high as 127.90. The close was just off the highs of the day and momentum has turned back higher. Jan feeders made their highest close today since November 12. Feeder momentum is pointing higher as well and today’s successful test of nearby support is positive.
LEAN HOG HIGHLIGHTS: Hog markets ended the day with mostly positive gains on news of the Phase 1 trade deal between the U.S. and China. Dec hogs went off the board 52 cents lower to 60.47, Feb hogs closed 85 cents higher to 69.50, and Apr hogs closed 1.60 higher to 76.22. The CME Lean Hog Index was up 26 cents to 59.72. Carcass cutout values closed 1.53 lower yesterday afternoon to 81.66 but were up 2.37 this morning to 84.03. The major story in the hog markets today was, of course, the U.S./Chine trade deal. Even though China has previously waived tariffs on U.S. pork imports, today’s deal stipulates that China increased their U.S. agricultural purchases, and pork would be a primary target due to current shortages caused by African swine fever. Despite the higher closes, the price action today was not quite so impressive. Feb hogs traded as high as 71.55 early in the session but were only able to muster closes 85 cents higher than yesterday’s close. Apr hogs also finished well off the day’s highs, trading as high as 77.45. The trend seems to have turned higher, but the lack of follow-through into the afternoon may be a bit concerning.