If markets could have a weekly theme, last week's would be "Deals."
The week of Oct. 7 ended with an announcement of the first phase of a trade deal between the U.S. and China. The trade war has been intensifying for over a year, and the news was initially met with a rally in both the stock market and agricultural commodity market. Claims that China would be buying somewhere between $40 billion and $50 billion of U.S. agricultural products was quite bullish.
But by the start of the week of Oct. 14, sentiment had shifted. Despite China's hopes of getting a deal done soon, there was not a reciprocal announcement of any such deal. And the $40 billion to $50 billion of agricultural products would well surpass the pre-trade war 2017 import total by the Chinese (of agricultural products) of $24 billion. Also, the "deal" held no significant details on how these changes would be made and held no enforcement language. As a result, the excitement petered out of the market for any trade deal.
The Trump administration was not going to stop there. Midweek, a proposal for the 2020 biofuels policy was released, with the president hoping to appease both the farm/biofuels and oil industry lobbies. Both have been critical of the current laws and have been pushing the president for changes in the coming year. With the election coming, President Donald Trump is looking for a win, but the response to his proposal was not met with much excitement. The plan holds too little for each side, and uncertainty remains for the biofuels policy of the U.S. with just a couple of months until 2020.
Then late in the week, British Prime Minister Boris Johnson announced a deal for Brexit that got markets excited again. Taking the place of former Prime Minister Teresa May, Johnson has set a hard deadline for withdrawal from the European Union for Oct. 31. He has stated that this will be done with or without a deal, but leaving without one would result in a lot of trade uncertainty in the region (along with other issues like travel, border with Ireland, and more). So the potential for a deal is there with Parliament soon to vote on the measure. Note that May had also previously put forward a few deals for a vote in Parliament that were not approved.
Wheat markets pushed higher this week. Snow across parts of the Northern Plains into Canada halted harvest of spring wheat, which was in its final push. The result could be a portion of the crop not getting harvested at all.
The U.S. Department of Agriculture reported 94% of the crop harvested, leaving 6% in the field. This will not have a huge impact on the broader wheat balance sheet for the U.S., but it does cut into supplies of available higher-protein wheat. Winter wheat planting is 65% complete and on schedule.
The durum market saw some support, with prices up 25 cents from a week ago. The same weather that was supportive to wheat has spilled over to the durum market.
The canola market turned back after hitting a high late last week. Pressure came as the aforementioned "deal" between the U.S. and China turned out to not be all it was cracked up to be.
The weather has not been favorable for crops and harvest activity in many areas.
There has been little excitement for the mustard seed market in recent weeks. There has not been much harvest activity because of poor weather.