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US China Trade Talks Begin On A Positive Note

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Good Morning from Allendale, Inc. with the early morning commentary for January 8, 2019.

Grain Markets traded in a tight range with little fund activity and light volume. Soybean futures pushed higher for a fourth straight session and reached a three-week high on dry weather concerns in Brazil. Trade talks began between U.S. and China are raising hopes of accelerated export purchases by China. Corn and wheat futures closed lower as some traders sold contracts to take profits from recent highs.

U.S. Commerce Secretary Wilbur Ross predicted U.S. and China could reach a trade deal that we can live with as dozens of officials from both countries resumed talks in a bid to end their trade dispute. I think theres a very good chance that we will get a reasonable settlement that China can live with, that we can live with and that addresses all of the key issues, Ross said.

China approved five genetically modified (GM) crops for import on Tuesday, the first in about 18 months in a move that could boost its overseas grains purchases and ease pressure from the United States to open its markets to more farm goods. (Reuters)

Chinese firms bought at least three cargoes (~ 180,000 tonnes) of U.S. soybeans yesterday, according to traders. One trader said the total was closer to 15 cargoes (~ 900,000 tonnes).

EU Trade Commissioner Cecilia Malmstrom will meet with U.S Trade Representative Robert Lighthizer today in Washington for talks on opening up their markets, the European Commission said. The Commission said U.S. soybean imports were likely to rise further after it began a process to allow the use of U.S. soybeans for biofuels in Europe. Malmstrom will also take part in a U.S. EU - Japan meeting tomorrow. The three nations will discuss subsidies made to state-owned firms and forced technology transfers. China will be the main topic of these talks.

Algeria's OAIC has issued an international tender to buy milling wheat, said European traders. The tender sought only a nominal 50,000 tonnes, but Algeria often buys considerably more in its tenders than the nominal volume sought. In its last wheat tender in November, the OAIC bought around 600,000 tonnes after also seeking offers for 50,000 tonnes.

Oil Prices surged higher rebounding on support from OPEC production cuts and steadying equities markets. Prices gained support from a Wall Street Journal report saying Saudi Arabia is planning to cut crude exports to around 7.1 million barrels per day by the end of January.

Major Chinese Hog Farmers sharply cut 2018 profit estimates after fast-spreading African swine fever hit prices and demand for pork in the world's largest hog producing area. Muyuan Foods Co. Ltd cut its 2018 net profit forecast between 500 550 million yuan (~ $73 million), down about 20% from an earlier estimate in October. Wens Foodstuff Group Co Ltd. also warned of 2018 net profit between 3.9 4.0 billion yuan (down 40% from 6.75 billion yuan last year).

Live Cattle & Feeder Futures rebounded sharply after five straight declining sessions on a round of strong bargain buying. Cattle futures also received support from news that the number of cattle offered for sale was down 6,200 from a week earlier, which could lend support to cash prices.

Dressed Beef Values were mixed with choice down 0.23 and select up 0.55. CME feeder index was at 146.06. Pork cut-out values were up .86.

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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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