Weather Forecast

Close

opinion

Erin Brown / Grand Vale Creative

Wait ... what just happened with China?

For those readers who have been living under rocks, in caves, or have suddenly forgotten how to read and hear, presidents Donald Trump and Xi Jinping of the U.S. and China, respectively, met last weekend on the sidelines of the G-20 summit in Buenos Aires, Argentina.

For weeks, the buildup to this meeting held hopes and fears of many farmers, traders and other agriculture industry members. The reason is that the presidents' discussions at this meeting would revolve around the current trade tensions between the U.S. and China. Tariffs already have been implemented, with increases set to go up in January for Chinese goods. Exports of newly harvested U.S. soybeans have basically been non-existent so far this fall. All eyes were on this meeting, with a trade deal potentially opening up the doors for improved pricing of agricultural (and other) goods through renewed market access.

So what happened? It has been almost a week and still the true details of what happened at that meeting are not crystal clear. What is known is that both sides called the meeting "highly successful" and seemed to be dedicated to resolving the current trade conflict. But this is where the clarity ends, as statements from U.S. and Chinese officials were rather different. The U.S. spoke of a 90-day hold on raising tariffs but China's statements did not mention a time table and spoke more generally of reducing trade barriers. The U.S. was specific on negotiations surrounding intellectual property protection and forced technology transfer but China spoke of generally reaching consensus on trade issues. And most importantly for the agriculture world, the U.S. said China would purchase "very substantial" farm, energy, industrial and other products with immediate restart to buying agriculture products. China simply stated that they will import more U.S. goods.

Leaving it just with these statements makes the path moving forward difficult enough to discern. But following comments and actions further muddy the waters. At first, the seemingly smooth agreement led to higher agriculture and stock markets, but Trump's mid-week comments that he believes in tariffs and would immediately increase them if a deal is not reached in 90 days sent prices tumbling. Reports then came out that the Chinese were upset with the U.S. move to publicly discuss (possibly incorrectly) the details of a private meeting. And then add to the fire the arrest made in Canada at the behest of the U.S. government of Meng Wanzhou, a top executive of one of China's leading technology firms Huawei (and the daughter of its founder). The arrest was made on allegations that the company violated sanctions against Iran by spreading Chinese technology. This move likely does not result in much good faith for trade negotiations, and the clock is (apparently) ticking.

Wheat

Wheat prices have been rather volatile over the last week compared to the relative quiet of the previous three months. Prices took direction from corn and soybeans and traded up after the G-20 summit, then back down midweek. End of week support came from improved exports from the U.S. as well as news out of the Black Sea. Russian exports seem to be slowing, as they were expected to do by the end of the year. Additionally, another incident has occurred in the Azov Sea overnight that will increase fear of export trouble for Ukraine. In Canada, the Statistics Canada report showed all-wheat production for 2018 at 31.8 million metric tons, up from its September estimate and 6 percent above a year ago.

Durum

According to the Statistics Canada report, durum production was 15.8 percent higher than a year ago, totaling 5.75 million metric tons. This is modestly bearish for an already depressed market, as higher output on top of poor export sales points to ongoing price pressure.

Canola

The canola market has found itself recovering nicely from recent lows. With crude oil depressed, it is difficult to imagine any major ongoing vegetable oil rally, but any direction change is welcomed. Soybean oil has helped pull up canola, with even the potential of a trade deal with China lending support (no matter how tenuous that potential trade agreement is). Statistics Canada showed production at 20.24 million metric tons for 2018. This was a rare reduction from the September estimate and a drop from last year of 4.6 percent.

Peas and lentils

Canadian pulse production is much lower than a year ago. Statistics Canada pegged 2018 dry pea output at 3.58 million metric tons and lentil output at 2.09 million metric tons. These are decreases from a year ago of 13 and 18 percent for peas and lentils, respectively. This could be helpful for pricing as smaller supplies coupled with the potential for added demand from India on poor weather conditions may result in support.

Barley

Canadian barely output was up 6.2 percent from 2017, totaling 8.38 million metric tons. Statistics Canada's report showed that even though yields were down, higher planted and harvested area allowed for increased output.

randomness