Alex Norton / Beeson Inc
It has not been much of a holiday for markets heading into the Christmas holiday.
On Tuesday, the U.S. Department of Agriculture released its monthly supply and demand estimates in the World Agriculture Supply and Demand Estimates (WASDE) Report. Usually, the contents of this report drives prices at least for that day, with changes made to commodity balance sheets that shape the way the markets react. This month, few changes were made to most of the U.S. balance sheets, so reaction may have been somewhat subdued regardless of what is happening in the political world.
With most crops harvested in the Northern Hemisphere and the mounting trade uncertainty from the U.S. and China conflict leading to changing export patterns, this weekend's G20 summit in Buenos Aires has the market's undivided attention. During the week, commodity markets found some support as buyers are stepping in and hedging in case a deal is reached between Presidents Trump and Xi Jinping. There is not a clear indicator that any agreement will be reached, and the U.S. could go ahead with implementing tariffs on Chinese goods. This would be bearish for commodity prices on Monday.
Just over a month ago, crude oil markets were surging higher. The December WTI futures price hit $76.72 per barrel. This week, the same contract hit its lowest mark since December 2017, falling 28.6 percent from the aforementioned high. The market is falling with large stocks and production capacity weighing on markets.
Look at the facts surrounding trade with China heading into Thursday. Mounting tariffs have been put in place on both sides, including Chinese tariffs on U.S. soybeans. Cases have been filed with the World Trade Organization against China for unfair trade practices. The U.S. has historically high expected carry-out of soybean supplies due to a record crop and an expected lack of export business with China.
The weather in Canada and the U.S. has been the focus for commodity markets. Improved conditions have allowed farmers in the Corn Belt and Plains to get some harvest done after dealing with cold and wet conditions for the last several weeks. There is still more to be done, but this shift has taken the market's attention from the ongoing trade saga. The recent renegotiation of the North American Free Trade Agreement was a big deal for farmers in both the U.S. and Canada. In reality, not much changed from an agriculture perspective other than greater access to Canada for U.S. dairy products.
The U.S. and Canada's negotiators reached an agreement just before the self-imposed Oct. 1 deadline on the North American Free Trade Agreement, or NAFTA. The U.S. and Mexico had come to an agreement just weeks prior, and many wondered if the agreement would move on without Canada involved, as repeated roadblocks during negotiations seemed to prevent a three-way solution.
The monthly supply and demand forecasts from the U.S. Department of Agriculture were released this week. With harvest of corn and soybeans just around the corner, the September World Agricultural Supply & Demand Report (WASDE) is always closely watched for an indication of production for both crops. Weather has been mostly favorable during the last month and expectations were set very high in the August estimates, with corn at 178.4 bushels per acre and soybeans at 51.6 bushels per acre.
Officials from the U.S. and Canada continue to work on a trade deal that would include Canada in the renegotiated North American Free Trade Agreement. The 24-year-old agreement that has included Mexico has come under fire from the U.S. President for being unfair, and threats of pulling out of the agreement have impacted markets for months. Just a couple of weeks ago, the U.S. struck a deal with Mexico, independent of Canada.