By: Dan Hueber –
Generally mixed grain and soy trade as we begin this final week of March 2017 and with little fresh to focus on, the trade is forced to look out to Friday and the release of the March USDA reports. Whether they actually tell us anything interesting or not will be another story but we will have to cross that bridge come Friday.
Trade surveys are filtering in and of those I saw over the weekend, we have average estimates as follows; Corn acreage 90.93 million, beans at 88.26 million and wheat at 46.12 million. Estimates for the March 1st grains stocks come in at 8.538 billion for corn, 1.68 billion beans and 1.627 billion for wheat.
There was a little disconcerting news filtering out of Mexico over the weekend as the uncertainly for the future of NAFTA has encouraged Mexico to work on Ag trade agreements with Brazil and Argentina, which may be close to signing. 98% of Mexico’s corn imports currently come duty free from the United States, which amounted to around $2.3 billion in 2015 and makes them our largest export destination. If a similar arrangement (zero tariff) is made with these South American countries it could provide them with a significant competitive advantage. As it is right now I understand that the cost to Mexico is nearly equal so changes in tariffs would be huge. Taken a step further, nixing NAFTA could result in tariffs of 194% against our products, which is certainly not something that the ag industry in the US would want to see.
The turmoil in Washington late last week has generated concerns about the ongoing gridlock and as such equity markets and the dollar have continued to lose their Trump-bump. The dollar has pressed sharply lower again to begin this week, and is back to pre-election levels and appears to remain in a defensive posture. For anyone expecting this to produce immediate buying in the commodity sector, they will likely be disappointed as there is not, nor should there be one-to-one correlation but if the trend remains intact, we should see money once again begin to flow away from the equity realm and back into commodities.