Could it be that there is a faint light beginning to shine at the end of the tunnel? Obviously, the grain and soy markets would like to believe so as news of a lowering of trade tensions between the U.S. and the E.U. has sent market sharply higher. Of course, when you add in additional reductions in world wheat production, shorts evidently decided it was time to “get out of town before sunset, or else.” (Does anyone who did not grow up with TV westerns even get that phrase?) In a nutshell, the U.S. has offered to drop the threat of tariffs on imported automobiles from Europe, and in turn, the E.U. will import more U.S. soybeans, and while possibly both are primarily symbolic, they are a step in the right direction. I have commented a number of times that after this psychological trade war “smack down” that we have experienced, any suggestion that the outlook was improving could produce immediate and sharp rallies, which we have now affirmed over the past 24-hours. Let’s keep in mind as well, as individual nations, we often do not think of any one as a major importer of soybeans but taking as a whole, the E.U. is our second largest importer (2.7 MMT in 2017), just ahead of Mexico (2.52 MMT) but of course they are all dwarfed by China (11.6 MMT).
Now that we are hopefully making nice with the E.U., maybe the same can happen with Mexico. Indeed, there has been some discussion that the U.S. and Mexico can strike some type of trade arrangement outside of a new NAFTA, which is great but needs to expediated as Mexico is not sitting still either. Not only have they been speaking with South America about securing more beans and corn, but the same also applies to wheat. Trade missions from Mexico are scheduled to travel to Argentina yet this week, and you can be assured that cash-hungry South American nation will be anxious to lock up market share if they can, and the same applies to Brazil. Already this year Brazil has exported ten times more corn to Mexico than last year. We have a similar situation in wheat but originating from a different source as imports from Russia and Ukraine are nine times higher than the same time last year. Not unlike our withdrawal from TPP, the rest of the world continues to strike deals, sans and at the expense of the United States.
Bargain hunters appeared to have taken advantage of the lower bean values as we posted very solid sales for both old and new crop this past week. For the current season, we sold 538,100 MT or 19.78 million bushels. Top buyers were the Netherlands with 143.3k MT, followed by Egypt with 141.k and them Mexico at 92.5k. For 2018/19 sales came through at 963,800 MT or 35.42 million bushels. On the top of the list was unknown destinations with 406.2k MT, followed by Pakistan with 234.5k and then Mexico at 95k. Old crop corn sales were not stunning at 338,500 MT or 13.33 million bushels. Mexico was the top buyers at 110.8k MT, followed by South Korea with 72k and then Israel at 47k. The 2018/19 figures were a cite better though at 747,500 MT or 29.43 million bushels. Here we found Mexico buying 249.9k MT followed by unknown with 125.4k and then Japan at 114k. Wheat sales were not overwhelming but improved significantly from last week ( 29%) coming in at 385,900 MT or 14.18 million bushels. Unknown destinations were at the top purchasing 100.8k MY, followed by South Korea at 80.5k and then Nigeria with 68k.
Markets have cooled off a bit from the initial excitement, and it may be questionable as to if we can sustain the gaps (higher) left when we opened. Regardless if that is the case or not, it would appear that we finally have the bears on the run and considering that in corn especially, they sit on sizable holdings, any more positive trade news could really send them scampering for the exits.