Trade Deal is Alive and Well and USDA Worksheet
Update for June 25th, 2020
For months now mixed messages regarding the U.S./China trade agreement have haunted the markets. Earlier this week we saw an excellent example of this when White House Advisor Peter Navarro told FOX News that the trade deal with China was over. This, of course, sent prices lower immediately. Once President Trump was made aware of the statement Navarro had made he sent a tweet that read “The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!” Navarro later explained to the Wall Street Journal that the comments he had made were “taken wildly out of context…I was simply speaking to the lack of trust we now have of the Chinese Communist Party after they lied about the origins of the China virus and foisted a pandemic upon the world.” U.S. National Economic Council Director Larry Kudlow was asked about the topic by FOX Business Network he said “They’ve actually picked up their game. It’s not just commodity buying, although that is picking up too but also extends to the issue of intellectual property theft which has long been one of the sore spots for the relationship.” During a phone interview yesterday with AgriTalk, U.S. Trade Representative Robert Lighthizer told listeners that there is a lot of misinformation and fake news regarding our trade situation with China. “I think Peter was misunderstood, trust me the trade deal is on”. He also explained that the relationship between the U.S. and China is tricky and will likely always be complicated but he fully expects that China will fulfill the commitment they made to the U.S.
China has held an enormous amount of corn in reserves for several years now which they have slowly sold off as needed. Grain and Oils News now reports that demand is outpacing production within the country by a significant margin and reserves are running low. According to their data 56 MMT of corn was available prior to the May 28th auction and since then nearly 16 MMT has been sold at weekly auctions, leaving the current supply around 40 MMT. As the supply has tightened the prices have risen and now exceed the price of corn imported from the U.S. by about 500 Yuan or $71 Dollars per metric ton for July through November.
Next Tuesday the USDA will release their Quarterly Grain Stocks and Acreage reports. The worksheet shows the trade estimate for some of the key data.
Source: USDA, StoneX, Reuters
This week’s USDA crop conditions report indicated a 1% increase to 72% in the GD/EX corn ratings but soybeans saw a 2% decrease to 70% in their GD/EX category from a week ago. Many producers across the country are reporting ideal growing conditions and with no major weather threat and no big demand story there is little to push prices higher. There are a few areas that have continued to miss the widespread precipitation and have ongoing drought conditions but those pockets are not large enough at this time to cause any concern in the market.
Senate Finance Committee Chairman Chuck Grassley (R-IA) has said that he believes that the most recent Covid-19 economic relief legislation will be approved prior to the August break. Discussions on the new relief package are set to begin after the July 4th holiday. The new relief legislation is expected to include significant new relief for U.S. agriculture as well as fix some of the flaws in the USDA’s program.
Looking at the 6-10 day outlook through July 3rd, most growing regions in the U.S. should expect above normal precipitation and above normal temperatures.
The long-range outlook for July 1st – July 7th shows a continuation of the same weather pattern.
The National Weather Service released their summer outlook on June 18th. This 90 day forecast for July through September calls for above normal temps over the entire U.S. with a small exception in the center of country. Above normal precipitation is expected across much of the Corn Belt through the 3 month period.