Has the water temperature risen a degree or two?

Published on: 08:27AM Sep 12, 2019

Could it be that we are witnessing a slight thaw in the U.S./Chinese trade relations?  Granted, it is not that anyone is ready to dive headfirst into a pool that is still filled with rather frigid water, but it would appear that parties on both sides are beginning to dip their toes in to test the temperature and you can bet that more than a few have their swimming suits on beneath the business attire and are just waiting for the chance to jump in.  Yesterday, I mentioned that there were increasing rumors that the Chinese were possibly nosing around and inquiring about purchasing ag products from the U.S., which has been confirmed by several sources and they did publish a list of good that will be exempt from tariffs, which included the feed ingredients, whey, and fish meal, but no other ag products. In turn, President Trump announced that the planned tariff increase on Chinese goods would be delayed until mid-October.  Reportedly this was done at the request of Chinese Vice Premier Liu He, as the original date of October 1st fell on the anniversary of the founding of the People’s Republic, but one has to imagine was also done in an effort to get the talks started on a less adversarial note.  As I commented yesterday, one should probably not become overly optimistic with these moves as we have been disappointed time and again over the past year and half, but it does appear to be a step in the right direction, and I suspect helped support futures prices overnight. 

It is worth pointing out as well that according to the numbers released by the U.S. Meat Federation, despite the 62% tariff, for the first seven months of this year, Chinese imports of pork from our nation are up 51% over last year. Interestingly enough, 25% or 61,000 of the 240,000 MT they have imported came in the month of July.  As I have mentioned several times in past comments, it only stood to reason that we would see the best increase in imports from China in the second half of the year.  

The White House has been scrambling to come up with some type of compromise deal between the biofuel industry and the petroleum industry and have called representatives from each in for separate meetings.  Sources say they have been pushing the biofuel representative to accept a plan to increase overall blending quota next year by 5%, but understandably the industry is looking for more and has been asking for “reallocation” which would entail large refiners to make up for the exemptions given to the small refiners.  Needless to say, the refining industry is none too keen on such an idea.  Of course, the White House would like to find a solution that will bring in the most votes possible for next fall and any changes and or agreements will need to be finalized by the end of November for them to take effect in 2020. 

Wheat has come back with very solid export sales this past week, totaling 610,900 MT or 22.45 million bushels.  This was 96% above last week and 20% ahead of the 4-week average.  Top purchasers were the Philippines with 109k MT, followed by Mexico with 91.9k, and then Indonesia taking 63.7k.  September 1stmarked the transition into the new crop year for corn and beans, which can always make the numbers look a bit skewed.  Even then, corn sales are not setting any records as they came through at 498,100 MT or 19.61 million bushels.  Mexico was the top purchaser with 193.8k MT, followed by Japan at 158.1k and then Colombia with 96.2k.  Soybeans though looked rather impressive, although not unexpected, at 1,172,200 MT or 43.08 million bushels.  Mexico accounted for nearly 55% of these sales with 644.3k MT, followed by unknown destination at 150k and then Thailand at 84.9k.  By the way, China was in for another 10,900 MT of pork last week.

It turns out that we have a busy news day as of course, this will be the release of the September report. Hopefully it does not disrupt what otherwise has been encouraging stories.  Once again, here are trade survey estimates; Domestic corn production is expected to come in at 13.672 billion bushels from an average yield of 167.2 bpa.  This compares with the August numbers of 13.901 billion and 169.5.  Bean production is estimated to total 3.577 billion bushels with a yield of 47.2 bpa. In August the USDA came up with a crop of 3.68 billion from a yield of 48.5.  2019/2020 ending stocks are expected to total 2.002 billion corn, 660 million beans, and 1.016 billion wheat, compared with 2.181 billion, 755 million and 1.014 billion respectively for each crop last month.

Last but not least, 2019/20 world ending stock for corn are expected to total 303.18 MMT, which would be down from 307.72 MMT last month and 328.58 for the 2018/19 crop year.  Beans are projected to come in at 100.11 MMT, down from 101.74 last month and 114.53 last year.  Finally, global wheat is projected to be 285.71 MMT, up from 285.4 last month and 275.49 last year.