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Markets Wait for Outcome of U.S.-China Trade Meeting

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Good Morning from Allendale, Inc. with the early morning commentary for January 7, 2019.

Grain Markets continued climbing higher, led by soybean futures. Soybeans, corn and wheat each recorded a third consecutive higher close. Soybeans were supported by news that the United States and China will be holding trade talks this week. Concerns about the declining of South American crops added support to soybean futures as well.

Last Week, March corn futures were up 7.25 cents, March soybeans up 26.75 cents, March wheat up 4.5 cents, March soymeal up $6.70 and March soyoil up 82 points.

US-Chinese Trade negotiations will begin today and conclude tomorrow in Beijing. Trump has said talks toward a deal are progressing well, but it is unclear if Beijing will yield to key U.S. demands over trade imbalances, market access, and alleged Chinese abuses of intellectual property. Trade rumors have been swirling China has bought 5-6 cargoes of May-June Brazilian soybeans last week. Some view this as a backstop if trade talks fail.

U.S. Economic Advisor Larry Kudlow said the trade discussions will focus on "the whole story, including commodities, agriculture and industrial capital goods. U.S. Chief Ag Negotiator Gregg Dowd and USDA Undersecretary Ted McKinney will both be part of the U.S. delegation in Beijing. On Friday, President Trump indicated Chinas recent economic weaknesses will strengthen U.S.s bargaining position.

IEG Vantage (Informa) showed U.S. winter wheat at 31.513 million acres (32.535 million acres last year). Informa estimates Brazil & Argentina soybean crops at 122 million mt and 56.5 million mt respectively (USDA showed 122 million mt and 55.5 million mt).

The USDA decided they will not release the January Supply/Demand, Grain Stocks, Crop Production, and Winter Wheat Seedings reports scheduled to be released this week due to the ongoing government shut-down which has prevented the USDA from preparing adequate reports on a timely manner. New release dates for the data will be set once government funding is restored said the USDA.

US Ethanol production showed a larger than expected drop in production to a 36-week low. However, ethanol stocks increased to 23.2 million barrels (23.1 million last week, +2.4% over last year).

Fed Chairman Powell said the Fed is not on a preset path of rate hikes and suggesting that it could pause on its policy tightening as it did in 2016. We are always prepared to shift the stance of policy and to shift it significantly" if needed. (Reuters)

China has warned the country's pork industry that covering up cases of African swine fever is a crime, days after a dead pig was found on a Taiwanese beach prompting Taipei to claim Beijing was not sharing accurate information on the disease. (Reuters)

Dressed Beef Values were lower with choice down 1.98 and select down 1.72. CME feeder index was at 145.60. Pork cut-out values were down .20.

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About the author

Paul Georgy serves as president/CEO of Allendale, Inc., a worldwide agricultural advisory and research firm that provides agricultural commodity price research and risk management alternatives for producers, major food companies, international corporations, foreign governments, and major news vendors.

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