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While not exactly awe-inspiring, it was nice to be greeted by a little rebound in the grain and soy markets this morning. Why does the phrase dead-cat bounce come to mind? Regardless, there is little in the news this morning to inspire the bulls, and we count down the days to the acreage and grain stock reports and possibly more important, T-Day, July 6th.
It does appear that China is trying to posture itself to counteract the proposed tariffs. They are dropping existing tariffs with other Asian countries on soybeans and soymeal which are current 3% and 9% for the two commodities. Realistically, this would appear to be little more than window dressing for negotiations as the only places in the world with real inventories are of course North and South America. I suppose this could be an avenue to circumvent the tariff on US beans but as I commented, suspect this is little more than window dressing and posturing for negotiations. While I by no means have any particular insight as to if a deal will be reached by July 6thor not, but should point out that in light of the collapse we have seen in prices and the fact that managed money has now returned to the short side, a reaction to a compromise could be rather positive and sharp. We can at least hope for such an outcome.
Only minor changes in the weekly progress as corn conditions slipped 1% and beans remained unchanged with figures of 77% and 73% good/excellent respectively. Spring wheat also slipped 1% but stands at 77% good/excellent. Winter wheat did slip a couple of points (37% gd./exec.) but considering we are in harvest, 41% complete, that does not carry much weight. The only other crop that I noticed going backward to any extent was rice, which slipped from 74% good/excellent to 70%. We should see several more weeks of solid crop ratings for corn and beans but as is normally the case, should see them begin to drift lower from there. The potentially deceptive issue this year is that if you ignore the drowned-out spots, crops look quite healthy and the assumption is that the tops of hills will compensate for the low areas. While it may be difficult to argue with that kind of reasoning, with grey skies and rains on the way once again, many of these plants are suffering with “wet feet” so looks can be quite deceiving.
Energy stories emanating from Washington as conflicting at best. Bloomberg reports that the White House is set to require refiners blend 19.88 billion gallons of biofuels next year but Reuters reports that the EPA is completely ignoring Department of Energy recommendations that waivers not be granted on biofuel mandates. Even though we have been told these decisions would be postponed until all the trade tariff and trade pact issues have settled down, it seems to be more a case of out of sight, out of the press, out of mind. I guess this is the win-win situation that Senator Ted Cruz is so fond of talking about.
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