Alex Norton, Beeson Inc.
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.
Heading into midterm elections in the U.S., President Donald Trump tweeted about good talks with China's president and suggested that an end to the months-long trade war could be close. This caused some price support ahead of Tuesday's midterms, even with chief economic advisor Larry Kudlow stating that resolution was not close after all. Since that moment, there has not been any more news on the matter, suggesting that it was more of a political move to rally the rural farm base for the GOP.
The U.S. Department of Agriculture released reports on quarterly stock levels for major grains as well as wheat production from the 2018 crop. As always, the commodity market was watching closely and generally found the report to be bearish. Corn stocks for the 2017-18 crop year were reported at 2.14 billion bushels compared to the lower trade estimate average of 2.01 billion bushels. Soybean ending stocks for old crop came in well above expectations at 438 million bushels compared to an estimated 401 million bushels.
The negotiations on the North American Free Trade Agreement continue between Canada and the U.S. There have been several roadblocks that keep the two sides from coming to an agreement ahead of the end of September deadline. Note that the end of September deadline is one that was put in place by the Trump administration. The thought is to get a deal done before the new Mexican president is put into office at the end of the year.
Market pressure has been the story for wheat (and many other commodities) for the last several weeks. Tariffs and trade concerns with the U.S. have pushed prices lower. On top of that, weather in the U.S. and most of Canada has been good, increasing expectations for good crops (generally). Speculative funds were getting shorter and the markets could not hold up against the bearish pull lower.
Despite Independence Day in the U.S. closing markets on Wednesday, the impact of the weather, trade outlook, and the government reports on acreage in the U.S. and Canada have given enough fodder to keep agricultural commodity markets on edge. First off, weather in the North America is hotter than usual, raising some concerns for crops in the long term outlook. Plenty of rain has fallen in the past few weeks (except for the U.S. Central Plains that remain in a severe drought), so crops are thriving despite the heat.
Commodity prices have plummeted with the U.S.'s ongoing trade disputes with China, the European Union, Mexico and Canada. Monday's declines were brought on by President Donald Trump's announcement of another round of tariffs on Chinese goods totaling $200 billion.
The weekly Crop Progress and Conditions report from the U.S. Department of Agriculture showed that the U.S. corn crop is in very good shape in the early going. Seventy eight percent of the crop is rated good or excellent, and just three percent falls in the poor or very poor condition category.
Late in the week, Statistics Canada released planting plans by farmers for the 2018 crops. Much like the Prospective Plantings report released by the U.S. Department of Agriculture at the end of March, this report sets the stage for potential production of major crops in Canada. The market's pre-report estimates and expectations set the stage and actual data compared to those reports shape the market direction that day. For example, canola acreage was huge in 2017, and the market expected another increase in 2018.
While most of the rest of the world has been trending warmer, the U.S. has been hit with colder-than-normal temperatures. Any glance at a weather map shows the incredibly bitter temperatures for the entire country. While this has its impact on the day-to-day lives of people dealing with snow, school closings and slippery roads, one must not forget the impact on crops. Of course, the primary growing season is not for months, but the winter wheat crop likely suffered some winterkill as a result of the extreme cold. Prior to the cold, weather had been generally warm.