By: Dan Hueber –
Well, this is getting us nowhere. After news broke yesterday that the United States had spurned an offer for two Chinese vice-ministers to fly in early for preparatory discussions ahead of the scheduled trade meetings on the 30th/31st, soy/grain markets slipped into a bit of a funk, and it appeared we were headed for lower ground into the end of the month. No so fast. Overnight, the topic of weather in Brazil came front and center again and the attitude seems to have shifted once again. At least for now. The independent consulting firm CONAB released the results of a survey of 10 different estimates and came up with an average soybean crop of 117.06 MMT. This would be around 2% below last year’s record crop. Of course, this is just an estimate and harvest is just in the early stages so could drop further but keep in mind, by no means is this a crop failure. It is just less than initial estimates, some of which had become rather hyped-up. 2016/17 production in that nation was 114.6 MMT, which itself had set a new record at the time. On a related note, the new president of Brazil, Jair Bolsonaro spoke at the economic forum in Davos yesterday and stated that they are open for business, i.e., investment. He is proposing to simplify taxes and red tape, privatize state owned businesses and crack down on corruption. The goal is to make Brazil one of the top 50 countries on the globe to do business in. Of course ,agriculture will play a major role in this.
It turns out that soybeans are not the only commodity that China has less of an appetite for as the December import figures reflect year over year declines for feed grains as well. Barley imports were down 75.4% from a year ago, corn was down 8.2% and sorghum were down 100% coming in at ZERO compared with 160,000 MT last December. Even pork exports were down 14.4%. The only commodities posting gains were wheat, up 14% and sugar up 25.8%. That had to have been a pretty sweet deal for someone.
As you can see on the corn, wheat, bean chart, the combination of these markets has done an admirable job of sustaining the gains earned thus far in the new year and continue to flirt around a tough resistance area that has stopped us post-tariff war. Granted, in the larger scheme of things we continue to remain in a very broad and just over 4-year sideways pattern, but it would appear we will need something encouraging next week from the U.S./China meeting to extend much further.
