The Allendale Wake-Up Call

China Makes Next Move

Good Morning! From Allendale, Inc. with the early morning commentary for April 4, 2018.  

Grain markets are responding to the latest move by the Chinese in the tariff war after having been dealt a new game with USDA’s planting data. Less planted acres are giving analyst the opportunity to be creative with balance sheet ending stocks. The USDA will release the April Supply and Demand numbers on April 10^th. Weather, trade tariffs, political actions and money flow will all help shape grain and soybean prices over the next several months. Producers will have to make decisions on risk management as profit opportunities develop.

China announced additional tariffs on 106 US products on Wednesday, in a move likely to heighten global concerns of a tit-for-tat trade war between the world's biggest economies. The 25 percent levy on U.S. imports includes products such as soybeans, cars and whisky, Beijing said (CNBC). The new tariffs are the reason behind the huge move in soybeans overnight.

Midwest weather is keeping planters out of the fields due to snow and extremely wet conditions. The forecast is for cool and wet for the next few weeks. With the smaller planted acreage, trade is very concerned about getting this year’s crops in the ground on a timely basis.

Funds were estimated net buyers of 11,000 corn contracts, 3,000 soybeans and 8,500 wheat contracts on the last reporting day of the week for CFTC data.

Summit of the Americas in Peru next week will give the US and Mexico the opportunity to push their NAFTA agendas.

CME raises corn and soybean margin requirements by 20%.

Brazil exported 8.81 mmt of soybeans in March vs 2.86 mmt in February and 8.98 mmt in March of 2017. They exported 1.32 mmt of soymeal during March vs 1.16 mmt last year during same period.

INTL FC Stone released their estimate for Brazil’s soybean production for 2017/18 at 115.9 mmt which was up 2.7% from the previous estimate. They put Brazil’s first corn crop at 23.37 mmt and the second crop at 63.09 mmt which is also an increase from earlier estimate.

Informa has updated their projections for Brazil’s soybeans with an increase of 2.0 mmt to 116.0 mmt. They lowered Argentine soybeans by 5.0 mmt to 39.0 mmt and corn by 2.0 mmt to 31.5 mmt compared to their March estimates.

Argentina changes the timing of the export tax on soybeans and soy product to the date shipped rather than the date the deal was closed. They also will be lowering the export tax by .05% per month through December 2019.

U.S. International Trade Commission said that the dumping of biodiesel imports from Argentina and Indonesia harms American producers, a move that locks in place duties on the imports. The latest duties make it virtually certain that biodiesel from Argentina and Indonesia will not be sold in the U.S. market, with combined rates of up to 159 percent on the Argentine fuel and up to 341 percent on Indonesian variety. (Reuters)

Cash cattle traded at 118 in Kansas yesterday which is a couple of dollars lower. Fed cattle exchange has 373 head being offered today. Country auctions are seeing lighter numbers this week. Could the lighter numbers be suggesting cattle feeders resisting lower prices?

Live cattle futures have quickly went to the 100 support level for the June contract. Chart support now points to contract low of 96.40 with resistance at 104.00

Cash hog prices have been trying to stabilize while futures continues to get pounded with selling. Tariffs on pork in China, fund selling, bear spreading along with technical selling are talking points for the break. Markets are oversold. June lean hog futures posted a new contract low on Tuesday.

Dressed beef values were lower with choice down .12 and select down 1.17. The CME Feeder Index is 134.94. Pork cutout value is down .50.

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