The Hueber Report

It seems that the majority of the discussion this morning centers on tariffs and trade wars, which is understandable as the next round, 10% on $200 billion Chinese goods and 10% on $60 billion of U.S. goods went into effect this morning.  If that were not enough to depress things, it was also reported that additional trade talks have been canceled.  The overall reaction to the news has been somewhat muted in ag markets this morning, which is encouraging after the nice rebound performance last week and would suggest the shock factor is over and the damage has been pretty well digested into the price level. In fact, grains have already shaken off the early pressure and have extended to the highest levels posted since early September.  

The August import numbers for China were released over the weekend, and it is not only beans that have been impacted.  Recognize that the majority of sorghum purchased by that nation comes from the U.S. and for the month that totaled 259,892 MT, which was 78.5% below a year ago. Corn imports were down 13.5% from last year, wheat down 51.6%, and barley down 29.1% There was one exception though, and that was hogs, which witnessed an increase of 10.8% from last year.  One would

suspect that the African Swine flu outbreak they have been wrestling with along with the fact that U.S. pork had to look like a bargain after the washout this year must have had something to do with the demand.  The 34% rally in hog futures since the beginning of August would seem quite justified.

While fund short covering appeared to be the driving force late last week, evidently managed money still favors a bearish outlook.  At the end of the week, they sat short on 141,000 contracts of corn, up 78,000 for the week and 70,000 contracts of beans, up 2,000.  

We were greeted this morning with sales of 162,000 MT of bean sales to unknown destinations, but outside of this, additional chatter has concerned harvest progress or lack thereof. It has been wet in the south and delta and in the northwestern reaches of the corn belt.  As such the trade is expecting the USDA this afternoon to report corn harvest is somewhere in the 15/20% complete range and beans between 10 and 15%. 

While it is encouraging to see corn and wheat extend into higher ground the morning, and beans really react mildly to trade war blues, I suspect we will see prices stagnant quickly.  This is the final week of the month and there will be a quarterly grain stock estimate released on Friday so once position squaring is complete, I would look for generally quiet trade once again.