Weekly Market Review
Trade deal euphoria helped pull grains higher last week as the fund/speculative trade was lightning their short positions. Some further detail on import intentions from China’s JCI consulting group indicated reaching the $40 billion in imports from the U.S. was indeed possible. Corn imports were suggested at a record 314 million bushels, up from the previous high of 200 million bushels. There is hesitation in the corn trade that China will import that much U.S. corn, as the offers from the Ukraine are $4-5/ton cheaper. Ethanol was noted as a possible commodity that might be included in the trade deal, but was not mentioned. The second largest commodity in the package was nuts, including almonds, cashews and pecans, up to $2.5 billion dollars.
Looking further into the trade deal export expectations from China, there are some other barriers to overcome. With soybeans being one of the largest commodities, there is demand destruction from African Swine Fever (ASF). Some in the pork industry say it will take up to 3 years for China to rebuild the swine herd to pre-outbreak levels. ASF is still breaking in China as they struggle to control it. Other issues include GMO restrictions and phytosanitary standards on imports.
South American weather improved slightly this week with some needed rainfall in Argentina over the weekend. Southeastern Argentina and Northeastern Brazil remain dry and have some rain in the extended forecast. Forecasters have suggested that while the driest areas of South America received some much needed rain, they are not out of the woods as dry conditions look to remain in the long range forecast.
Export inspections for the week ending December 19th, were below the previous week for corn and soybeans. Corn came in below trade estimates at 15.2 million bushels, with Mexico as the top destination. Soybeans were within trade estimates at 39.8 million bushels, with China was the top destination. Wheat was higher than last week at 21.3 million bushels, with Mexico as the top destination.
January soybeans have rallied to a six-week high and 64 cents off the low two weeks ago. This has been mostly fueled by the phase one trade deal as it is expected to be signed early next month. The USDA announced this week 126 million tons of U.S. soybeans were sold to China for 19/20.
China announced they would reduce tariffs on over 850 products on January 1st, this would include frozen pork. To help build China’s pork supply, the current import tariff on pork will go from 12% to 8%. Purchases of U.S. pork by China are currently at a 10-week high, the reduction in tariffs could help raise that. Twenty-three countries that have trade agreements with China will benefit from the tariff reduction.
For more information, you may contact Adam Suntken at (712)-454-1061, or e-mail at email@example.com. The opinions and views expressed in this commentary are solely those of Adam Suntken. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. Please visit our Risk Disclosure Page for more information on commodity trading.
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