A rain makes grain mentality along with steady concerns about the rapidly approaching T-Day (tariff day) on the 6thof July have joined forces to carry grain and soy markets lower to begin this week. None that I have looked at thus far has carried into actual lower lows, as we remain well entrenched within last week’s ranges but there would certainly seem to be nothing in the news this morning that would strike fear into the hearts of the bear, and their numbers have grown. According to the commitments of traders report issued last Friday, managed speculative money is now short 14,000 contracts of corn, 13,000 beans, and 1,000 wheat. They do remain long meal ( 84,000) but for the week sold a net 6,000.
We have additional moisture on tap this week for the corn/bean belt, but I am not sure if many farmers will view this as a blessing or a curse. Granted, that which is flooded out will not drown a second, or maybe third of fourth time but as we discussed last week, neither corn nor bean plants seem to like sitting in saturated soils for extended periods of time, which has been the case for many. It was noted this morning as well that decent rains have come to western and southern Australia, which has added to the negative psychology in wheat.
There does not appear to much news on the trade war front, at least as pertaining to tariffs but I did read that the U.S. Treasury is in the process of developing new rules that would restrict companies that are more than 25% owned by Chinese interests from purchasing U.S. companies that deal in “industrially significant technology.” While I do not know what would be classified as industrially significant, (I suppose ChinaChem-Syngenta would not apply as they are Swiss based) but I have to imagine seed/chemical companies should be classified as significant technology. In my mind at least, this would be hitting China where it counts and would be a far better way of addressing trade issues. By no means am I well versed in the nuances of doing business in China, but it is my understanding that one of the key gripes is that if you want access to their market, there are onerous rules and regulations on ownership as well as the technology that has to be surrendered to gain access, and the U.S. is not alone being singled out. It would seem that this could be an ideal way for us and our allies to join forces to demand changes but of course, none of us are on great speaking terms at this point. As commented last week, the target is correct; it is just the approach that is wrong. Tariffs wielded as a weapon more often than not inflict pain in the wrong direction.
I mentioned last week as well that world demand for beans has not disappeared, it is just reshuffling, and maybe once all the dust has settled, markets will again refocus on this. Note that last week, U.S. beans out of the gulf were priced at almost $36 a tonne less than beans at the Brazilian port of Paranagua. There are a few other issues in that nation as well. After a nationwide trucker strike, the government imposed a hike for shipping rates, which has translated into uncertainty in the grain business. Uncertainty often breeds volatility but also increased cautiousness, and in many areas, this has translated into grain buyers pulling out. In several regions, there have been no bids for 25 days so realistically have left farmers unable to take advantage of markets.
For now, we remain uncomfortably patient as we work out to the acreage and grain stocks reports at the end of the week and closer and closer to T-Day.