Grain and livestock futures were mostly lower on May 20, with only feeder cattle posting gains. The downturn followed profit taking in grain and cotton markets after China’s Commerce Ministry denied the $17 billion agricultural purchase amounts that had been released in a White House fact sheet earlier in the week.
Mark Schultz of Northstar Commodity said the market was skeptical about the lack of specifics before China denied the reported purchase figures. “I think the other part of it is it’s now day number three since we’ve had the announcement that they were going to do some more business with the U.S. And we have yet to see any type of purchases being made of any sort being announced. Maybe the trade looked around and said, we’ve got three days. We got a lot of length in this market. No confirmation,” Schultz said.
Schultz questioned why China would confirm such deals, noting, “I would hold that card closer to my chest all the way along as well. I would not relinquish what we agreed to. If the U.S. wants to tell what we did, fine. But I don’t need to make that as a forecast of what we did as well.” He added that export sales have been quiet recently: “We haven’t, other than 150,000 metric tons of meal to Italy in the last two weeks, we haven’t seen anything in the daily reporting service of any kind from any country. So all of a sudden our export business has just shut down quietly.” High energy prices have also contributed by making shipping more expensive.
A collapse in crude oil prices later in the day put further pressure on markets after President Trump suggested a possible peace deal with Iran might be close at hand. Schultz said, “Today, with energy dropping 20, 22 cents on gas and diesel and crude down $6 a barrel, I mean, it just also cast a little bit more of a negative tone across the board.” Fast planting progress—76% for corn and 63% for soybeans—also weighed on prices amid non-threatening weather forecasts.
There are still some problem areas due to excess rain or frost damage requiring replanting but Schultz described these as small percentages overall: “It was affecting maybe up to 40% to 50% of safinha corn… That has been narrowed down…the rest has picked up enough moisture.” Wheat crop ratings remain poor for hard red winter wheat but much may already be priced into markets unless unexpected purchases occur.
In livestock markets feeder cattle rebounded while live cattle closed lower despite record cash trade levels last week; lean hogs continued their downward trend hitting new lows for June contracts amid weak demand both domestically and globally according to Schultz’s comments throughout his analysis.
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