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Technically Speaking: Deal or No Deal?

10:24AM Mar 01, 2019
Jerry Gulke_Technically Speaking

Will prices continue the trend downward into March? Or will March mark an attempt at a price recovery?( AgWeb )

It seems like just last week we were discussing what results we might see after the meeting between the U.S./China leaders at that infamous dinner on Dec 1, 2018. The 90 days came quickly without a signed agreement but did result in an attempt at memos of understanding and an unspecified delay in imposing new tariffs on Chinese goods. 

In the meantime, China has indicated they would by an additional 10 mmt on top of the 10 mmt already announced back in December. Important questions still are unanswered as to when new purchased would be made and for what delivery period. 

We have finally caught up with all the past USDA info including yesterday’s up-to-date export sales report. Corn and beans export sales were good but expected and needed especially for soybeans. Wheat was within estimates. Weekly beef sales were 37 mlbs with shipments of 33 million lbs. Pork sales totaled 64 million lbs. with shipments of 59 million lbs.; there was over 10 mlbs of sales and shipments to China, so China continues to buy pork but at reduced amounts. Not only has the trade not been overly impressed with catch-up USDA info but Thursday’s sales report did not spark any bullish response either. It is like the market place has finally come to grips with the obvious? 

Traders have seemingly become more uneasy about the status of trade talks with China after comments this week by Trade Representative Lighthizer and Ag Secretary Perdue. Perdue said that Chinese officials have indicated that China will make more large agricultural purchases from the U.S. in the future, but he also said that nothing has been set in stone and that negotiations could still fail to end in a new trade agreement. Lighthizer said that the U.S. will need to maintain the threat of tariffs on Chinese goods for years even if a deal is made to end the trade war. Lighthizer also said that if a trade deal is reached with China it will likely be done by an “executive order” and thus not need congressional approval.

Trump’s pull-out of North Korea talks refusing to make a bad deal sends a signal to the Chinese situation that it isn’t a done deal even though he needs one—so flip a coin I guess but odds still indicate a deal of sorts as he has already said he’d delay new tariffs indefinitely—so we are likely held hostage for some time to come.  

I put out significant price charts that I mentioned often that would predict in advance the fundamental situation that is a moving target and evolves it seems with every tweet keeping the trade on edge. However, the charts below show what can happen to prices often after producers and traders alike become accustomed to a slow market. The warning signs were well publicized, and the results now show pretty clearly the deterioration.  Technical indicators prompting Gulke Group to increase significant hedge coverage in advance are not shown. 

A tenant I have is to watch previous month’s lows when starting a new month. Will prices continue the trend downward into March or will March mark an attempt at a recovery either from some very good negotiation news or an evolution of concern over a wet spring creating uncertain final planting of the acreage mix? 

(click images to enlarge)
 
July 2019 Corn 
 

 

July soybeans

 

wheat July 2019