How Will the Tariff War Play Out?
Mar 23, 2018
Good Morning! From Allendale, Inc. with the early morning commentary for March 23, 2018.
Grain markets are apprehensive as President Trump places more trade tariffs on China, and the Chinese respond. Just how this whole trade/tariff war plays out is difficult to see at this point.
China announced plans for reciprocal tariffs on $3 billion of imports from the U.S., including products from steel to pork, after President Donald Trump’s move to order levies on a range of Chinese goods sent markets plunging. China plans to take legal action against the U.S. under the World Trade Organization framework, the Commerce Ministry said in a statement Friday. It plans a 25 percent tariff on U.S. pork imports and 15 percent tariffs on American steel pipes, fruit and wine, the statement said. (Bloomberg)
Weekly export sales were delayed yesterday due to the storm over the east coast. Instead, they will be released at 7:30 today. Trade is expecting large sales of corn and soybeans for this time of year. Corn 1,400,000 to 2,100,000 tonnes, soybeans 700,000 to 1,400,000 tonnes, wheat 100,000 to 300,000 tonnes, soymeal 100,000 to 300,000 tonnes and soyoil 20,000 to 50,000 tonnes.
Informa lowered their 2018 corn acreage estimate to 88.9 million acres, raised soybeans to 91.5 million acres, and slightly raised their all-wheat number to 46.1 million acres.
The Buenos Aires grains exchange has lowered their estimate of the Argentine soybean and corn harvests to harvest 39.5 million tonnes and 32 million tonnes of corn respectively in 2017/18. Their previous estimates were 42 million and 34 million tonnes.
The International Grains Council predicts that global grain stocks will drop in 2018/19. They see total grain stocks falling to 560 million tonnes, including 265 million tonnes of corn, and 253 million tonnes of wheat.
Managed money funds were estimated buyers of 3,000 corn contracts, 2,000 wheat, and 3,500 soymeal in yesterday's trade. They were sellers of 2,000 soybeans, and 4,000 soyoil.
The economic calendar is light this morning with Durable Orders at 7:30 AM CDT, and New Home Sales at 9:00. Macro markets will likely focus on a US government budget, and Trump trade policies rather than economic reports.
Congress is on the verge of passing a $1.3 trillion omnibus that would fund the government through September and provide the biggest federal spending increase in years. The bill is loaded with provisions given its likely standing as the last legislative train leaving the station before the midterms, and members have been scrambling to compete for a slice of the funding pie. (The Hill)
Trade Representative Robert Lighthizer reports progress on NAFTA talks between the US, Canada, and Mexico after a tough auto-content demand was dropped by the United States. While challenges remain, analysts feel a deal may be in reach.
Cold Storage, out yesterday afternoon, had end of February beef stocks of 460.276 million lbs, under the 485.5 trade guess. Pork stocks were reported at 614.918 million lbs, right next to the 613.0 million lb. trade estimate.
Cattle-on-Feed report will be released today at 2:00 pm. Trade average estimates from Reuters is: On Feed 108.2%, Placed 104.2% and Marketed 101.2% of a year ago. Quarterly Hog and Pigs report will be released on week from today.
Dressed beef values were higher with choice up .83 and select up 1.63. The CME Feeder Index is 139.39. Pork cutout value is down .71.
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