Well, so much for signs of encouragement on the NAFTA negotiation scene. As you have undoubtedly heard, the United States government announced yesterday that is intends to move forward with tariffs on imported aluminum and steel, including our neighbors to the north and south. Both nations quickly announced retaliatory measures with Mexico imposing like tariffs on $4 billion worth of farm and industrial products and Canada tariffs on $12.8 billion on imports from the US. The grain and soy markets appear to have taken this in stride as none of them specifically were identified but no so for hogs. Included on the list from Mexico were pork legs, apples, grapes, cheese, and steel. The hogs market was just appearing set to climb out of the pit it was pushed into after the initial trade sanctions were announced earlier this year and this news appears to have scared would be bulls once again.
I am sure there are more than a few people who take the attitude that these nations have limited alternatives to securing ag products, but I believe this is short-sighted reasoning at best. Last year Mexico accounted for 28% of all US corn exports and around 1/3rd of all pork exports and are the second largest importer of US beans and meal. While Canada tends to purchase more finished products and fruits and vegetables, which in turn should provide more jobs here, in dollar terms they are the largest importer of US agricultural goods, amounting to $24.57 billion last year. In case you are wondering, number 2 on the list is China with $24.09 billion in imports last year and 3rd is Mexico who brought in $19.49 billion of US ag products. Of the top ten countries who buy our ag products, these three account for 68% of the total sales. Yes, over the near-term these nations have limited alternatives to purchase some products, particularly grain/soy but it would appear they are being provided long-term incentive to invest elsewhere in trade agreements and technology. This is one of the reasons that more often than not, there are no real winners in trade wars. You may come out on top in a skirmish here or there, but long-term ultimately lose the real war. Of course, in the meantime, there will also be collateral damage, and unfortunately, it seems those wounds are too often inflicted on US agriculture.
Weekly export sales were released this morning and at first glance, did not look overly encouraging for either wheat or beans. For the current crop year in wheat, we sold just 29,500 MT or 1.08 million bushels. This was 74% below last week and the 4-week average. That said, we are winding done this crop year, and sales for 2018/19 were not bad at 270,900 MT or 9.96 million bushels. Top purchasers in new crop were Thailand taking 110k MT, followed by Japan with 80.4k and unknown destinations at 45k. Current crop year bean sales improved significantly from last week coming in at 273,400 MT or 10.05 million bushels. Top buyers were Japan at 91.4k MT, followed by the Netherlands with 69.4k and then Pakistan at 58.5k. New crop sales were a bit more encouraging though as here we witnessed sales of 771,600 MT or 28.36 million bushels. Probably the most notable part of this though is that the main buyer was China with 438k MT and then unknown destinations at 330k. There have also been stories circulating over the past day or so that COFCO has purchased around 10 million tonnes of US beans this week, which would be the first sales since the trade skirmishes have begun. Let’s hope the tariffs announced yesterday do not scuttle these. Corn sales were 16% higher than last week but came in within the range of estimates at 993,100 MT or 39.10 million bushels. The top position belonged to Japan who purchased 299.1k MT, followed by Mexico with 291.8k and then Colombia at 113.1k. New crop sales in corn were just 149.3k MT or 5.88 million bushels.
Were we to finish the week right now, July corn would be down 11 ½-cents, July beans down 19-cents and July wheat down 24 ½-cents.