The big story today is Trump’s intentions to sign the Congress approved Hong Kong Human Rights and Democracy Act as US and Chinese officials try to complete Phase One of the trade deal. The US equity markets and commodity markets of interest to Chinese trade are all feeling the pressure today. The latest US government reports are suggesting the economy is slowing but still growing. Concerns center around the weakness in the labor market and manufacturing.
Grain & Oilseeds
Export sales were above the average estimates and towards the top of the ranges. US corn is well priced at these levels as are soybeans. Corn is competitive with the Black Sea and South America will be out of the export game for the next few months. US Soybeans are now about 30 cents under Brazil for December and 10 under for January. Support for Jan Soybean is $9.00 and then $8.90. A break below $8.90 could cause the funds to go from net long to net short. I personally don’t see the funds getting net short unless the Phase One trade deal completely falls apart.
Hard to be bullish with exports low and the balance sheets adequate to burdensome. Also hard to be bearish when the US and China are still talking and the expectations the USDA is overstating this year’s crop. For now the path of least resistance is lower and that means Jan Beans could trade to $8.90 and Dec Corn to $3.60
Cattle on Feed and Cold Storage is tomorrow. The average estimate of US cattle on feed as of 11/1 is 101.2% of last year. Analyst range is 98.2 to 102.5. Last month on feed was 98.9%. Placed is expected to be 111.4% of last year (96.2-119.0 range) vs 102.0 last month. Marketing are expected to be 99.7% of last year (99.3-100.1 range) vs 101.1 last month.
The big takeaway here is how big the range is for Cattle Placed on Feed. A big miss in that category could cause some volatility.
Hogs are feeling the pressure of delays in the US/China trade deal. Domestic cash prices are still at a big discount to April, May, June, July, and August. If the market does not think China will buy more US pork then futures will go lower, and the big movers could be in the deferred months. I think Feb Hogs puts in a low soon. Futures are getting close to a fair value compared to the cash index and we are still optimistic China will need US pork.
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