U.S. agricultural exports could be at risk in any retaliation over tariffs implemented by the White House, U.S. Secretary of Agriculture Sonny Perdue said.
Tension over trade has been simmering in agribusiness circles for months, after the White House slapped duties on imported washing machines and solar panels -and, more recently, President Donald Trump’s plan to impose sweeping tariffs on steel and aluminum.
The steel and aluminum tariffs are set to go into effect this week. Perdue said that while the United States is not currently in a trade war, there have already been repercussions seen in response to the White House’s moves.
“There’s certainly some trade disruptions based on aluminum and steel tariffs,” Perdue said on the sidelines of the National Grain and Feed Association’s annual convention.
Corn closed the week $.05 3/4 lower. Last week, private exporters announced sales of 110,000 mts of corn to Peru; 115,000 mts of corn to an unknown destination; 138,000 mts of corn to South Korea and 206,000 mts of corn to Japan.
Weekly export sales of corn showed a total of 57.3 mb (1,455,700 mt) including a cancelation of 0.6 mb (14,500 mt) for the 2018-2019 marketing year. This put total marketing year sales at 1.776 bb, 3 percent less than the previous marketing year. In the weekly EIA report, ethanol production increased 24,000 barrels to 1.049 million barrels per day. This compares to the 5-year average of 938,000 barrels per day. Texas corn planting is now 35 percent complete versus 26 percent last week and 30 percent last year.
Average planting pace is 26 percent. While the U.S. still has a large supply/carry in cushion, this could quickly evaporate if the U.S. production is down sharply from prior years in 2018. Informa estimated 2018 planting intentions for corn at 88.9 million acres, down 259,000 from January.
Strategy and outlook
As prices rally, producers should look to sell the carry and lock in basis as it narrows. You can replace ownership with option or futures strategies. Producers should be making new crop sales on this rally.
Soybeans closed the week $.20 lower. Last week, private exporters did not announce any private sales.
Weekly export sales of soybeans showed a total of 33.0 mb (899,100 mt) with 27.9 mb (759,100 mt) for the 2017-2018 marketing year. This put total marketing year sales at 1.838 bb, 7 percent less than the previous marketing year. The key pod setting stage in South America should be completed by now, leaving the market to remove any weather premium that may remain in values. With the South American growing season effectively over as well as an expectation for an increase in U.S. seeded acres in 2018, look for prices to work lower into the March 31 stocks and acreage report.
The report could be a shocker to the trade as larger than expected seeded acres combined with larger than expected quarterly stocks could prove to be bearish to the trade. Informa estimated 2018 soybean acreage at 91.5 million acres, up 280,000 from January.
Strategy and outlook
As prices rally, producers should sell the carry and lock in basis as it narrows. You can replace ownership with option or futures strategies. Producers should be making new crop sales and hedges.
This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Midwest Market Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such.
Brian Hoops can be reached at (605) 660-1155.
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