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Remember the old Rolaids ad? How do you spell relief? Well, according to Ag secretary Purdue it is spelled $12 billion. As I would imagine you have already seen, yesterday the Trump administration made good on its promise to try and assist those in agriculture negatively impacted by the Chinese trade war with $12 billion that will be divvied out via the Commodity Credit Corporation. Details are lacking at this point, and I am not sure as to how they came up with the amount, but it is interesting to note that last year China did import $12 billion worth of U.S. soybeans. Considering the fact that as the trade war bombs began to explode, and shrapnel rained down on innocent bystanders in the agricultural sector, it seems only reasonable that there should be some compensation for the injuries suffered, but I suspect there are few who would not rather have seen a different approach. While justified, compensatory aid may help bandage the wounds, but we all know they are not a solution and the longer it takes to find that, the more long-term damage can occur. I have commented previously that yes, there are winners in a trade war, but it is more often than not those who are not involved. Yesterday, the largest farm cooperative in Brazil, Coamo Agroindustrial Cooperativa, published projections for the coming year and expect revenues to increase by 35%, directly attributed to the U.S./Chinese trade issue. While they may or may not realize such gains, you know that these competing nations and companies are working diligently to establish long-term relationship involving trade deals and investment that will impact us for decades to come. Yes, the relief is welcome but the quicker the war is ended, the better our future wellbeing.
It would appear that the world wheat crop continues to shrink as the consultant group Strategie Grains lowered estimate for the European soft wheat crop once again. That now project a crop of 130 MMT, down from an estimate of 132.4 MMT earlier this month and 141.8 MMT last year. This would be the lowest output for the EU since 2012.
Between this and lower than expected preliminary yields on the first day of the spring wheat tour appears to have reignited buyers in wheat, which has helped prop up other markets as well. Minneapolis wheat is leading the way, but both Chicago and KC futures have pushed into higher highs for the swing as well. I have often commented that we need to see the wheat market lead the way out of the basement and you can never have a corn market truly advance with wheat left behind. We have been rounding out a bottom in the wheat market for the past three years, and ultimately, we will need to press above the 5.50 zone for a final confirmation, but it appears to me that we have finally turned this enormous ship around and the outlook into 2019 appears positive.
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