Soybean Futures Higher Following Trade Deal Confirmation
December 13 2019 - 4:24PM
Dow Jones News
By Kirk Maltais
--Soybeans for January delivery rose 1% to $9.07 1/2 a bushel on
the Chicago Board of Trade on Friday, with the market reacting
cautiously to China's confirmation of a trade deal.
--Corn for March delivery rose 0.9% to $3.81 a bushel.
--Wheat for March delivery rose 0.4% to $5.32 1/2 a bushel.
HIGHLIGHTS
Dearth of Details: The market finally got a Phase 1 trade deal
between the U.S. and China, but the many-times-bitten grains
traders were quite shy about jumping into futures. The Trump
administration said China will buy between $40 billion and $50
billion worth of U.S. agricultural products, but traders are
skeptical. "They need U.S. pork, they need U.S. soybeans," said
Dave Marshall of First Choice Commodities. "Do they need $50
billion of agricultural goods? Absolutely not."
Christmas Comes Early: With China confirming it reached a deal
in principle with the U.S. for the partial trade agreement, some
traders say the market may be on course to continue a late-year
rally. "If you start to make these [managed money] funds
uncomfortable, we can maybe have a Santa rally," said Jason Britt
of Central States Commodities.
INSIGHT
Looking for Answers: The big question of how much U.S.
agriculture China intends to buy will likely be addressed by the
USDA when it releases its next WASDE report Jan. 10. "I think a lot
of us are trying to figure out how this will affect balance
sheets," said John Payne of Daniels Trading. If the Chinese agree
to buy more than their normal load of agriculture, the USDA would
likely have to reconsider what grain inventories will look like,
which would then inform how much U.S. farmers will have to plant in
the next season, Mr. Payne said.
Delayed Gratification: The U.S. grains market may not
immediately see a jump in export sales now that China has agreed to
a limited trade deal, said Karl Setzer of AgriVisor. "I would be
surprised to see a huge jump in sales right away, as China would
have nothing left to prove," said Mr. Setzer, adding that most of
the big sales of U.S. agriculture occurred when China wanted to
show "good faith" in the negotiations. However, signing of the
final deal appears contingent on China following through promises
to buy more U.S. farm products.
South American Stumble: If a deal is indeed done, then South
American grains prices will likely drop while U.S. prices rise,
said Dan Basse of AgResource. "A confirmed deal would be bullish
U.S. ag and force funds to cover shorts in corn, soybeans and
pork," Mr. Basse said. "South American soy and corn basis would
fall sharply."
AHEAD
--The USDA releases its weekly grain export inspections data at
11 a.m. ET Monday.
--The National Oilseed Processors Association (NOPA) will
release its crush statistics at noon ET Monday.
--The EIA releases its weekly update on ethanol production and
inventories at 10:30 a.m. ET Wednesday.
Write to Kirk Maltais at kirk.maltais@wsj.com
(END) Dow Jones Newswires
December 13, 2019 16:09 ET (21:09 GMT)
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