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Grain Markets Rebound On Trade Talk Optimism

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Good Morning from Allendale, Inc. with the early morning commentary for January 10, 2019.

Grain markets rebounded higher yesterday on hopes China will increase its buying of U.S. agricultural products following three days of trade talks with the U.S. this week. Soybean and wheat futures pushed higher for the fifth time in six sessions. Corn also jumped higher on anticipation of more Chinese goodwill purchases. Overnight, however, lack of detail of any new purchases is leaving traders a bit frustrated.

U.S. Officials said China has pledged to purchase a substantial amount of U.S. agriculture, energy, and other manufactured products. China gave approval to import five genetically modified crops yesterday. Many see China's new GM approvals, which include both corn and soybeans, as a positive step towards ramping up purchases of U.S. grains and oilseeds.

China's delegation stated that the two sides made progress on structural issues such as forced technology transfers and intellectual property rights in the talks and that more consultations are being arranged. No schedule for further face-to-face negotiations has been released yet.

AgRural sharply reduced its Brazilian soybean crop estimate to 116.9 million tonnes (121.4 million tonnes last month), citing hot and dry weather in southern Brazil.

Egypt's GASC bought 415,000 tonnes of Russian wheat in international purchase tender, traders said. GASC said it bought 295,000 tonnes of wheat for a Feb. 20-28 shipment period and 120,000 tonnes of wheat for a March 1-10 shipment period.

FranceAgriMer lowered its forecast of 2018/19 French soft wheat exports outside the EU to 8.7 million tonnes (8.8 million last month). FranceAgriMer kept unchanged its outlook for 2018/19 soft wheat exports within the EU at 7.7 million tonnes (down 17% from last season).

China's approval of imports of a DowDuPont Inc. genetically modified soybean puts significant pressure on rival Bayer AG, investors and analysts said. Now U.S. farmers will have another choice when planting season begins. China bought roughly 60% of U.S. soybean exports ($12 billion) prior to the U.S.-China trade war and could reject shipments of unapproved varieties.

The European Union and U.S. have not yet agreed on the scope of trade negotiations, but the EU will not include agriculture in the talks, its trade commissioner said. "We have made very clear agriculture will not be included," Cecilia Malmstrm told a group of reporters, though she said the two sides had not yet agreed on that issue.

U.S. liquefied natural gas vessels going to China in 2018 fell by 20% from last year primarily due to the trade war. As the trade war escalated during the last six months of 2018, only six liquefied natural gas vessels went from the U.S. to China (25 vessels during same time in 2017).

The Fed Cattle Exchange had no cattle sales yesterday. There were 571 head offered in five lots. Asking prices were at $125. There were no bids offered. Separate from the FCE, dressed bids were at $194 against offers of $202. Last week's dressed sales were noted at $194/$195.

Dressed Beef Values were lower with choice down 0.14 and select down 0.79. CME feeder index was at 145.70. Pork cut-out values were down .49.

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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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