A signing of the Phase 1 trade deal with China could go a long way toward enhancing President Trump’s book with farmers and ranchers as it is supposed to bring down high tariffs, allowing freer imports of US agricultural commodities, a market analyst said.
There are rumors the pact will be signed soon, perhaps even this week, analyst said.
The commodity that affects cattle the most would be corn. Soybeans and hogs would be more in line for a direct change in buying activities from China, but other commodities like corn and cattle likely would see a ripple effect, too.
CORN COULD JUMP
Corn prices could see a major jump, analysts said. The Commodity Futures Trading Commission’s Commitments of Traders report said large commodity investment funds, known as managed money, have a net short position in corn.
If managed money begins an aggressive campaign to cover its shorts, prices could rise sharply, the analyst said.
The latest COT report shows managed money’s collective net short corn position as of last Tuesday at 86,717 contracts, down 9,254, or 9.64%, from 95,971 a week before. It’s not their largest net short position, but it is short, and they have money to cover. Their most recent peak in their net short position was on Sep. 17 when it was short by 181,051 contracts.
Commercial traders, those who own the corn and primarily are hedgers, also hold a collective net short corn position, being short by 259,684 contracts last Tuesday, up 11,393, or 4.59%, from 248,291 a week before. This was their largest net short position since Aug. 27 when it was short by 271,721 contracts.
The CFTC said managed money arrived at its net short corn position by liquidating 5,187 long positions, 14,441 short positions and unwinding 4,299 spread positions, compared with the previous week. This left them with 9.9% of total long open interest, 14.9% of total short open interest and 15.7% of total spread open interest.
Commercials got to where they were by liquidating 5,755 long positions and adding 5,638 short positions, leaving them in charge of 27.3% of total long open interest and 45.0% of total short open interest.
The CME Group said total corn open interest last Tuesday was 1.466 million contracts, down 20,542, or 1.38%, from 1.487 million a week earlier.
CME trade data also showed the most-active Mar corn contract has held in a narrow, flat trading range for more than a week.
FUNDS NET LONG LIVE CATTLE
In contrast to corn, managed money was net long live cattle futures last Tuesday. At 86,458 contracts, it was the largest net long position since May 14 when it was 88,472 contracts.
Being that long live cattle, managed money could wait to see what happens with corn before making a move in cattle, the analyst said.
CATTLE, BEEF RECAP
Cash cattle trading took place last week at mostly $122 per cwt on a live basis, up $1 to $2 from the previous week. Dressed-basis trade happened at $195 to $196 per cwt, up $3 to $4.
The USDA choice cutout Monday was up $0.70 per cwt at $209.66, while select was up $0.84 at $205.41. The choice/select spread narrowed to $4.25 from $4.39 with 91 loads of fabricated product sold into the spot market.
Nine steer contracts were retendered for delivery against the Dec live cattle futures contract on Monday at 1. There also were nine reclaims at 1.
The CME Feeder Cattle index for the seven days ended Friday was $139.14 per cwt, down $5.47 from the previous day. This compares with Monday’s Jan contract settlement of $145.42, down $0.12.