Weekly Market Recap
12/28/2018 3:46:59 PM
The Chinese Ministry of Commerce stated that China and the US held a vice- ministerial-level call last week, the second such call to have a “deep exchange of views” on trade imbalances and the protection of intellectual property. No further details were released, but the ministry’s web page stated that the two countries “made new progress” on the issues and discussed timetables for further calls and mutual visits. A US trade team will travel to Beijing during the week of January 7, 2019 to hold trade talks with Chines officials. Deputy US Trade representative Jeffery Gerrish will lead the US delegation. Meanwhile, consultations via telephone between the two countries regarding trade will continue until the face to face meetings in early January. Monday, December 31, 2018 is First Notice Day for January futures positions. If you are not out of long positions by the close of business on Friday December 28, 2018, you risk being part of the delivery process. We are a full week in to the partial government shutdown and it continues to affect news relating to commodities. Export sales and the Commitment of Traders Reports will not be issued because of the shutdown. A showdown between President Trump and Congress is expected next week when the new Congress is gaveled in.
Trade talk making the rounds has the possibility of India importing up to 1 million tons of corn due to shortages and rising prices. The European Commission raised its estimate of 2018/2019 corn production in the EU to 67.5 million tons, up 4.6 million tons from its previous estimate of 62.9 million tons. BAGE pegged Argentine corn planting at 73% complete vs 60% last week vs the average of 72%. Ratings pegged 54% of the crop in the good/excellent category, 39% fair and 7% poor/very poor. Ukraine has exported 23.1 million tons of grain this marketing year, including 9 million tons of corn, up from 5.5 million tons the previous year.
Russian State Statistics Service reports that the final figures from the 2018 Russian grain harvest show wheat production at 72.1 million tons and total grain harvest at 112.9 million tons. These figures compare with the record 2017 harvest of 86 million tons of wheat and total grain harvest of 135.5 million tons. Ukraine has exported 10.3 million tons of wheat this marketing year compared to 11 million tons at the same time last year.
On January 1, 2019, China will remove import and export tariffs on some goods, including import taxes on alternative meals used in animal feed such as rapeseed meal, cotton meal, sunflower meal and palm meal. This is being done to secure raw materials during the trade war with the US. Chinese soybeans mills continue to feel extreme pain from the trade war with the US as at least 20 factories, including two of the largest crushing mills in China, have cut or suspended output as record stocks of soymeal and low demand from hog farmers weigh heavily on crush margins. Wire stories this week quoted Brazilian farmers in various regions of Mato Grosso as being concerned that the dry, hot weather experienced in December may lead to reduced soybeans yields in those regions. Some farmers experienced 10-20 days of the dry, high heat conditions during that time leading to the concern over possible yield reductions. BAGE pegged Argentine soybean planting at 83% complete vs 74% last week vs 82% last year vs the average of 84%. Conditions improved to 31% good/excellent vs 21% last week, 53% fair vs 62% last week, 16% poor/very poor vs 17% last week.
More new cases of African Swine Fever (ASF) continue to show up in China. China has found the ASF virus in some hog feed despite rules against using hog blood as a feed ingredient. China has eased some transportation restrictions in order to keep pork supplies adequate ahead of the Chinese New Year. It doesn’t seem like anything is working with new reports surfacing almost daily. China’s pork imports increased from October to November by 10%. Not much cash cattle trade in the US during the holiday interrupted week. most offers are $2 to $3 higher than last weeks trade as big winter storms are disrupting logistics and hampering animal weight gains. Packer margins are slightly better than last week at $115/head.
WTI last traded up $0.55 to $45.16, down $0.43 on the week, down $5.77 for the month and $28.09 for the quarter. AAA reports the national average price for gasoline of $2.289, down from $2.349 last week and $2.527 last month. Q4 2018 is on pace to be the most profitable quarter for gasoline retailers in the 21st century, with an average margin of 34.4 cents/gallon.