Optimism over trade talks takes futures to new weekly highs
Lack of USDA reports had traders headed for the exits at the start of the week. But by the time they hung it up for a three-day weekend today, no news from the agency turned out to be a good thing.
Sometimes, of course, those pesky USDA reports bring bearish surprises, so the on-going government shutdown removed one potential fuel for sellers. That left the market free to focus on the trade dispute between China and the U.S. While news on that front was worrisome to start the week, a series of reports over the past two days lent support to ideas the two sides might be able to work out a deal.
Officially, negotiators from China aren’t due back in the U.S. until the end of the month. But tantalizing bits and pieces are leaking out that give hope. Yesterday’s headlines focused on potential for the U.S. to drop some of its tariffs to break a logjam of serious disagreements between the two sides. Today those “unnamed sources” said China may be ready to agree to close its trade gap with the U.S. by increasing imports over the next six years.
Whether this is just more talk or a real shift in the landscape is unknown. But money managers anteed up, increasing bets on risky assets in stocks and commodities.
U.S. stock indexes posted gains of more than 1%, as S&P 500 futures confirmed a move above the 50-day moving average. Crude oil jumped more than $1.50 a barrel, despite a stronger dollar. While safe havens like gold and Treasuries sold off the greenback gained as other central banks seem ready to follow the lead of the Federal Reserve and hit the “pause” button on credit tightening. Investors tend to buy currencies of countries with higher rates.
Some position squaring may have also been in play today. U.S. markets close Monday in observance of the Martin Luther King Jr. holiday.
Corn futures closed a little higher Friday after two-sided trade. March futures survived a bout of selling near the open to post session lows before quickly rebounding.
Gains in soybeans lent support, as did ongoing hot and drier weather in Brazil, which raised concerns about the country’s big safrinha corn crop planted behind soybeans. Basis had a firm tone as buyers rushed to cover needs ahead of this weekend’s heavy snow.
While USDA isn’t providing confirmation of export deals due to its closure, South Korean feed makers were active buyers this week. That’s an indication that end users are doing what needs to be done, USDA or no USDA. South Korean buyers typically cover some of their needs both before and after major USDA reports. With no data coming out, they stepped back into the market this week, breaking some of the market’s bearish momentum.
Technical buying also helped, as March futures moved above its 50-day moving average.
March futures closed up 1.75 cents at $3.8175, with December up a half at $4.0375. Initial volume was 321,587, compared with 375,734 on Thursday.
Soybeans posted gains on Friday, finishing off session highs with some late profit taking noted. But the market was able to avoid a turn lower on hopes the trade talks between the U.S. and China might be bearing fruit.
While some rain fell in Brazil over the past 24 hours, conditions overall continue a warmer and drier pattern expected to last over the next weeks. But demand is also uncertain because Chinese purchases may begin to slow down ahead of Lunar New Year holidays that close markets Feb. 4-8.
Basis had a weaker tone in the export pipeline as storms bore down on the river system. Bids weakened at the Gulf with bids from processors looking flat.
March futures closed up 9 cents at $9.1675 with November up 7.4 cents to $9.5575. The nearby will have significant prices targets less than a dime higher next week to see if the market has the ability to shrug off lack of USDA data.
Initial volume today was put at 158,677 today compared to 179,771 on Thursday.
Wheat prices ended mixed, with a promising overnight surge yielding to two-sided trade. The market jumped higher on reports Russia would control grain prices on its domestic market. That triggered more reoccurring fears the large exporter might restrict wheat sales abroad too. But like earlier spikes, this one quickly played out as well.
Weather kept the softer tone from getting any worse. Some winter wheat fields could see their first round of sub-zero temperatures this weekend. Most areas look safe, thanks to a fresh blanket of heavy snow that will precede the cold snap.
March soft red winter wheat futures closed unchanged at $5.1775 on initial volume of 66,584, compared to 93,805 on Thursday.
HRW March ended at $5.06, up 2 cents, with volume at 44,292 compared to 71,495 yesterday. Minneapolis March finished up 2.25 cents to $5.7425.