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As you are most likely aware, as one of the initial and official acts as President, Donald Trump hammered the final nail in the coffin of the Trans-Pacific Partnership or TPP as it is most commonly referred to. This of course comes as no surprise as during the presidential campaign, backing this trade deal had become akin to supporting a nuclear reactor meltdown and it was going to be dead on arrival upon the desk of either candidate. Be that as it may, not all, but a number of farm organizations including the American Farm Bureau Federation, the National Cattlemen’s Beef Association and the American Soybean Association have all expressed disappointment that the package was to be nixed. I suspect that this does not mean an eventual deal is completely out of the question and would not be surprised that plans are already in the works to try and put together a new agreement but I also believe the concerns from the farm community reach far beyond this specific agreement. The bigger concern surrounds questions in domestic policy and particular, energy. When you look at a number of the cabinet picks, particularly Rex Tillerson, former head of ExxonMobil as Secretary of state, Rick Perry as head of the Department of Energy and Scott Pruitt to head up the EPA, all who are fossil fuel advocates. Note that the investment community is banking on support for traditional energy as since the election $3.9 billion has flowed into US energy stock funds (intentional pipeline pun there) and the S&P 500 energy stock index has gushed higher by around 7%. What could all of this mean for the ethanol industry? Of course, none of us know as of yet but it does demand close scrutiny as will the soon to begin discussions concerning the next farm bill. When libertarian learning organizations like the Heritage Foundation and fossil fuel supporters have the ear of the president, we in the ag community should take nothing for granted.
There have been some that have speculated that the large export sales that we witnessed in the final months of 2016 were a result the uncertainly of who would be in the Whitehouse and what that could mean for relations but it is nice to see that we still have good sales taking place with familiar names. This morning the USDA announced sales of 163,000 MT of beans to unknown destinations with 60k of these for the 17/18 crop year, 112,000 MT of beans sold to Mexico but with 70k of these for the next crop year and 125,000 MT of corn sold to unknown for this marketing year.
In his weekly report, Dr. Cordonnier, who is currently in Brazil, reports that overall the crops in that country remain in decent shape with the early harvest of beans is progressing very nicely. He estimates that in central Mato Grosso 11% of the beans are harvested and 5% of the safrinha corn is already planted. In Argentina, he notes that the weather is predicted to turn dryer but suggests that the damage is already done and it is too late for any kind of significant replant to occur. He has left his production estimates unchanged for both nations.
Grain and soy markets all poked just a bit higher during the overnight hours but appear to be struggling just a bit as the hours click by. I continue to believe we should be arriving or are at least close to having arrived at the rest stop for this part of the upward journey and expect to see prices move into more of a defensive correction phase as we travel into February.