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Grain Markets Show Optimism As Trade Talks Continue

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Good Morning from Allendale, Inc. with the early morning commentary for February 19, 2019.

Grain markets edge higher as optimism grows about a trade deal between U.S. and China ahead of a visit to the U.S. capital by China's vice premier.

Last week, March corn futures were up 0.5 cents, March soybeans down 7 cents and March wheat down 13.75 cents, soymeal up $0.40 and soyoil down 92 points.

Chinese Vice Premier, Liu He will visit Washington this Thursday and Friday to continue trade negotiations with the U.S., the Commerce Ministry in Beijing said.

CFTC Commitments of Traders has managed funds long +44,000 corn contracts, soybeans short at -23,000, wheat short -9,000, soyoil short -31,000 and soymeal long at +7,000.

JP Morgan feels both U.S. and China are eager to de-escalate trade tensions. Both sides issued constructive recaps of last weeks trade talks that will continue this week in Washington. JP Morgan says most likely outcome is that current US tariffs on Chinese goods will continue through the end of April and trade talks will be extended and removal of existing US tariffs will be gradual over the next 6 months as U.S. monitors compliance.

USDA will release WASDEs 2019/20 US Grain Supply & Demand forecasts this Friday at 6:00 AM CST. USDA will also release the remainder of delayed weekly export sales reports on Friday at 8:00 AM CST. USDA will delay posting the 10-year Baseline Forecasts until after the February Outlook Forum on March 13th, 2019.

Brazil soybean harvest advanced to 36% complete (19% above last year) as some farmers sowed the soy earlier and then speeded up harvesting due to dry and hot weather. Consultancy AgRural said in spite of being ahead of last year and above a 19% five-year average, harvesting slowed slightly over the past few days due to the return of the rains.

January NOPA crush was at 171.630 million bushels, the fourth largest of any month on record and the biggest ever for the first month of the year, topping most trade estimates, according to NOPA data released on Friday.

Australia wheat production fell to 17.3 million tonnes (21.24 million tonnes last year), said the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) in its final estimate of last seasons harvested crop.

FranceAgriMer estimated 85% of French soft wheat crops were in good/excellent condition (84% GTE last year).

Major Chinese frozen food producer, Sanquan Food Co. said it has recalled products that may be contaminated with African swine fever, following media reports that some of its dumplings tested positive for the virus. Pork consumption in 2018 was estimated to decline by 0.5 percent due to consumer fears over safety, market research firm Euromonitor International told Reuters in late January. Overall, consumption will still be up slightly on last year at 41.3 million tonnes.

USDA's weekly cattle kill estimates dropped to 596,000 head (620,000 head last week).

Dressed Beef Values were higher with choice up .78 and select up 0.58. The CME feeder index is 141.50. Pork cut-out values were down 1.45.

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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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