The largest daily corn sales to China and the fourth largest sales to any destination was announced Tuesday morning. USDA said daily corn sales totaling roughly 1.762 million metric tons will go to China for 2020-2021.
It comes on the heels of China purchasing 1.36 million metric tons of corn last week. USDA also announcing the country purchased an additional 129,000 metric tons of soybeans.
While the markets moved on Tuesday, some analysts don’t seem too interested by the sale, since it doesn’t change USDA’s supply and demand forecasts.
“We’re already penciling in a 17% or 18% increase in exports year-over-year,” says Joe Vaclavik, the founder and president of Standard Grain. “We need these exports just to get to USDA targets. I’m just saying that if we’re going to hit those numbers, we need to see this sort of stuff. We hope that this is just the very beginning of a big buying spree. I don’t think anybody’s convinced of that just yet.”
Yet there are other factors when it comes to the market. Analysts say the market wasn’t impressed with the purchases announced on Friday or USDA’s slew of reports that day.
“I am actually disappointed the market didn’t have more of a bounce Friday morning when we got that purchase,” says DuWayne Bosse, an analyst with Bolt Marketing LLC.
It was overshadowed by President Donald Trump’s comments regarding a possible Phase 2 Trade Agreement. Trump said the relationship between the two countries has deteriorated too much, pointing to coronavirus as one reason for the strained relationship.
Reuters reported how Trump said on Friday he’s not currently thinking about negotiating a “Phase 2” trade deal with China, as relations between Washington and Beijing soured over the coronavirus pandemic and other issues.
When reporters aboard Air Force One asked the President about the possibility of a second phase trade deal following implementation of a Phase 1 agreement this year, he said, “I don’t think about it now,” adding that he has many other things on his mind.
“The relationship with China has been severely damaged. They could have stopped the plague; they could have stopped it. They didn’t stop it,” Trump said.
“Right now, we’ve given back three-quarters of the rally that we enjoyed last week,” said Virginia McGathey, founder and president of McGathey Commodities Corporation during Tuesday. “The announcement coming out of the White House about abandoning the Phase 2 agreement with China for now just because of the tensions that are happening, all of those things are piled on top of each other.”
Some analysts believe U.S. producers are in the middle of a weather market, especially since the market didn’t see too phased by the last USDA reports Friday.
According to Pro Farmer, weather models continue to suggest multiple rain chances and rather seasonal temps across much of the Corn Belt over the next two weeks. The placement of a high-pressure ridge means the Delta and southwest Corn Belt will be hottest and driest.
USDA also trimmed both the corn and soybean ratings Monday from the previous week in the “good” to “excellent” category.
“All of us as human beings are going to be susceptible to our emotions, which can swing wildly during a weather market,” says Brian Basting, research analyst with Advance Trading. “It is a volatile market but how you view volatility as a grower is critical.”