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Concerns over phase one trade agreement's impact on demand

China and the U.S. are set to sign the phase one trade agreement next week. Officials from China are coming to the U.S. to begin mending the relationship by signing the deal. However, details on the agreement are unclear at this time. The U.S. ha...

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China and the U.S. are set to sign the phase one trade agreement next week.

Officials from China are coming to the U.S. to begin mending the relationship by signing the deal. However, details on the agreement are unclear at this time. The U.S. has announced that China will be importing $40 billion to $50 billion of agricultural products this year and next. But there are real doubts about the viability of that plan.

First off, the Chinese have not yet confirmed that plan and have routinely stated that their import policy will be based on demand and protection of local producers.

Secondly, soybeans are a big hope for increased purchases, yet demand has been met through the first quarter as recent purchases of Brazilian soybeans were made (totaling roughly 800 thousand metric tons).

Finally, there had been hopes of added biofuel demand in China that would boost U.S. exports of the fuel. However, an announcement was recently made to hold off on increasing blending requirements that would have boosted demand.

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Look for the market to see some downside if hopes of rising demand for a variety of products does not come to fruition after the trade agreement is signed.

Wheat

Wheat markets have been supported to start the year. Export demand for U.S. wheat has been good, keeping in line with U.S. Department of Agriculture expectations.

Durum

Durum prices remain near previous levels with little excitement to start the New Year. Look for the market to stay steady with some potential downside if the turn of the calendar brings about farmer selling.

Canola

The canola market has continued its positive trend. The market is being pulled up by strong soybean and palm oil markets. With tightening palm oil supplies in Asia Pacific, it is clear that there is going to be ongoing support for fats.

Barley

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The major barley news has revolved around Australia. With dryness an issue in areas, as well as rising export demand, prices have been firming.

Mustard seed

News on Canadian mustard seed markets has been light to start 2020. Abroad, markets are higher with New Delhi mustard seed futures rising this week. Supplies are limited and speculators are supporting the market with bullish bets.

Pulses

Statistics Canada data has shown steady green pea exports into the end of calendar year 2019. Despite the steady flow, total demand has dipped to 16% compared to the prior year. India has been the primary destination as demand has risen quite a bit, with China the next destination of choice. However, yellow pea shipments have slowed month over month, but total for the crop year are running 30% above the previous year. China has been the biggest buyer.

Similarly, field pea exports have been slowing to the end of the year, but remain 22% above a year ago.

Lentils exports have been strong to end 2019. November exports were up 22% compared to the same date in the previous marketing year.

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