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Soybean Futures Close Lower Friday on Trade Pessimism

Trade deal with China in question after USTR report.

Soybean futures closed Friday's shortened session lower on concerns that the U.S. and China will reach a trade agreement at the Group of 20 meeting in Argentina. 

The U.S. Trade Representative's office this week issued a scathing report, saying China has yet to alter its " unfair" trade practices with regard to intellectual property. The countries -- the world's two largest economies -- have imposed tens of billions of tariffs on each others' goods since July. That includes soybeans, whose export sales since the start of the marketing year on Sept. 1 are down by a third from the same period last year while actual shipments are off by 42%, according to the Department of Agriculture. 

China responded to the USTR's report on Thursday when Ministry of Commerce spokesman Gao Feng said the allegations of intellectual property theft are untrue.

Wheat prices also finished the truncated session lower after rising in early trading. Futures gained on optimism that Egypt would purchase U.S. grain, but so far the North African country hasn't released the results of a recent tender in which it was seeking 55,000 to 60,000 metric tons from global suppliers. 

Soybean futures for January delivery fell 2 1/4¢ to $8.80 3/4 a bushel on the Chicago Board of Trade. Soymeal lost 40¢ to $306.20 a short ton and soy oil fell 0.18¢ to 27.81¢ a pound. 

Corn futures dropped 2 3/4¢ to $3.59 a bushel in Chicago. 

Wheat for March delivery declined 1/4¢ to $5.06 1/2 a bushel in Chicago while Kansas City futures fell 7 1/4¢ to $4.85 3/4 a bushel. 

In the outside markets, oil futures plunged 6.8% to the lowest level in more than a year, the Dow Jones Industrial Average was lower and the dollar value increased 0.2%. 

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Wednesday's Grain Market Review

Soybeans closed higher on Wednesday while corn was little changed on low volume ahead of the Thanksgiving holiday. 

Prices were lower to start the session after the U.S. Trade Representative released a report saying China hasn't curbed its unfair technology trade practices and continues to steal intellectual property. In a 53-page report, the USTR said China continues to steal intellectual property, and highlights cases brought against those arrested for such theft. 

"This update shows that China has not fundamentally altered its unfair, unreasonable, and market-distorting practices that were the subject of the March 2018 report on our Section 301 investigation," USTR Robert Lighthizer said in a statment. 

Presidents Trump and Xi Jinping are scheduled to meet later this month at the Group of 20 meeting in Argentina. Trump said in a Nov. 1 tweet that he spoke to Xi and that the two discussed trade. He said at the time he planned on having fruitful talks with the Chinese president. The countries -- the largest economies in the world -- have placed tariffs on tens of billions of dollars' worth of each others' goods in the past four months.

Soybean sales to China have dried up, leaving global shipments from the U.S. since the start of the marketing year on Sept. 1 down 42% year-over-year, according to the Department of Agriculture. Total commitments to buy U.S. beans are down 32% from the same period last year, government data show. 

Prices turned higher as investors kept an eye on harvest progress. While there's only about 10% of both the corn and soybean crops in the field, some ares could see snow over the weekend, which could further keep farmers from completing the harvest. 

Fundamentals aside, today's light volume made prices more vulnerable to swings, said Brian Grossman, a broker with Zaner Group in Chicago.

"Soybeans are just in a holiday trade mode today," he said. "The turn around in cotton and soybeans together makes me wonder if there isn’t some new “optimism” on the trade front but I really think it is a day we can’t think too much into it."

Soybeans for Januray delivery closed up 3 1/2¢ to $8.84 1/2 a bushel on the Chicago Board of Trade. Soymeal futures added 40¢ to $307.50 a short ton and soy oil gained 0.51¢ to 27.85¢ a pound.

December corn futures were unchanged at $3.61 1/4 a bushel.

March wheat closed 2 3/4¢ lower at $5.05 3/4 a bushel while Kansas City futures lost 4 1/2¢  to $4.92 3/4 a bushel.

In the outside markets, NYMEX crude oil jumped 1% to $54.44 a barrel while Brent futures gained 1.3% to $63.33 a bareel. The U.S. dollar was lower, and the Dow Jones Industrials closed unchanged, erasing early gains.

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Tuesday's Grain Market Review

DES MOINES, Iowa -- On Tuesday, the CME Group’s soybean market did most of the heavy lifting, finishing stronger.

At the close, the December corn futures finished 1¢ lower at $3.61¼. March futures settled 1¢ lower at $3.72¼.  

January soybean futures ended 7¼her at $8.81. March soybean futures settled 7¢ higher at $8.94½.

March wheat futures closed 2¢ higher at $5.08.
 
December soymeal futures closed 1.60¢ per short ton higher at $307.10. December soy oil futures ended 0.02¢ higher at 27.34¢ per pound.
 
In the outside markets, the NYMEX crude oil market is $3.80 lower, the U.S. dollar is higher, and the Dow Jones Industrials are 476 points lower.

Jason Roose, U.S. Commodities, says that the markets will creep toward the Thanksgiving holiday.

“Soybeans are trading cautiously higher today, after yesterday’s sell-off in all grains. Slow producer-selling, harvest progress under trade estimates, holiday positioning, and U.S./China trade optimism are all giving the market support."

On Tuesday, private exporters reported to the U.S. Department of Agriculture the following activity:

  • Cancellations of export sales of 200,588 metric tons of corn for delivery to unknown destinations during the 2018/2019 marketing year.
  • Export sales of 123,567 metric tons of soybeans for delivery to unknown destinations during the 2018/2019 marketing year.

The marketing year for corn and soybeans began September 1.

Al Kluis, Kluis Advisors, says that the gyrating markets can be expected for a while.

“This type of up one week, down the next week in the grain markets is likely to continue. The energy markets also rolled over on Monday, putting pressure on the ethanol and corn markets. The U.S. stock market was sharply lower on Monday and the U.S. and global stock markets are under pressure again today,” Kluis told customers in a daily note.

He added, “This is going to be a good week to lock in basis on your December corn hedges. Historically, the week of Thanksgiving is a good week to make some sales.”

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Monday's Grain Market Review

On Monday, the CME Group's farm markets fade.

At the close, the December corn futures finished 2 1/4¢ lower at $3.62 1/4. March futures settled 2 1/4¢ lower at $3.73.  

January soybean futures closed 18 1/4¢ lower at $8.73 3/4. March soybean futures closed 18 1/4¢ lower at $8.87 1/2.

March wheat futures finished 8 3/4¢ lower at $5.06 1/2.

December soymeal futures closed 5.40¢ per short ton lower at $305.50. December soy oil futures closed 0.05 lower at 27.32¢ per pound.

In the outside markets, the NYMEX crude oil market is $0.71 higher, the U.S. dollar is lower, and the Dow Jones Industrials are 440 points lower.

Britt O'Connell, Commodity Risk Management Group cash advisor, says that the soybean market, this morning, is seeing pressure as hopes of progress with China regarding a trade deal cool.  

“Last week, the Chinese did submit a list of concessions that President Trump had requested, while the list was unimpressive, the general feel was that it was good faith effort to walk towards a trade deal.  Plus, over the weekend the Asia Pacific Economic Cooperation summit ended with no formal joint statement, for the first time in 25 years.  The Chinese and US officials could not agree on the language of a formal statement regarding the summit.  Vice President Pence indicated that the US is in no hurry to end the trade war,” O’Connell says.

O’Connell adds, “As the prevail sentiment regarding the timeline of a trade deal goes, so goes the soybean market.”  

Corn and wheat are once again followers and a casualty to the soybean market, O’Connell says.

“The fund money has moved to a near net neutral position on corn. With technical damage being done last week on the lowest close since October 31st, follow thru selling is possible.  Going forward, $3.60 and $3.56 are the next areas of key support to monitor versus the December contract,” O’Connell says.

USDA announced Monday that private exporters reported export sales of 138,000 metric tons of corn for delivery to South Korea during the 2018/2019 marketing year.

The marketing year for corn began Sept. 1.

Al Kluis, Kluis Advisors, says there are market questions looking for answers.

“Can nearby soybeans close above the $9.00 resistance level this week? If the market turns lower, support is at the bottom of the continuation gap at $8.75,” Kluis told customers in a daily note.

Investors remain bearish, regarding the soybean market, according to Friday's CFTC Report.

In soybeans, money managers increased their net-short positions, or wagers on lower prices, to 49,485 futures contracts last week. That’s up from 38,866 futures contracts the previous week, the CFTC report showed.

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