Free Commentary

I am not sure if there is a logical explanation for it, but it seems that on Wednesday, or Mittwoch, for those literal-minded Germans out there, we are often devoid of much market-making news. “Big” government reports are released either early or late in the week, and outside of daily sales in excess of 100,000 MT, export activity is reported on Monday and Thursday in a typical week.  By the way, the USDA did report an additional sale of 327,000 MT of beans to China this morning.  Be that as it may, we do have a scattering of international news to fill the void today.

It turns out that Iowa is not the only region that has suffered significant storm damage this year, as the extremely wet spring/summer and now a typhoon has wreaked havoc with China’s corn crop. It is estimated that up to 10 MMT (over 390 million bushels) may have been wiped out, which would equate to around 4% of that nation’s output.  There would appear to be no mystery as to why they have been substantial buyers of corn as of late.  Obviously, Cargill is bullish on future trade in that nation as well, as they were the top bidder in an auction for Shandong Xinliang Oils and Fats Co.  Last but not least, for Chinese news this morning, the WTO has ruled that the tariffs imposed on Chinese goods in 2018, which kicked off the trade war, violated global trade rules.  As you might expect, I read that Robert Lighthizer is livid this morning.  I suspect few would argue that the WTO needs to be updated and reformed as much has changed since it’s origination twenty-five years ago, not to mention the fact that it is based on the General Agreement on Tariffs and Trade (GATT), which dates back to 1948.  That said, as international trade continues to expand, it only stands to reason that we need a universally agreed-upon set of rules and regulations.  As a side note, it is well documented that the country that brings forth a complaint will win the dispute 90% of the time.  Since 1995, the U.S. has filed more complaints than any other nation, 114 out of 522, has been victorious in 91% of them, and has won all 20 cases we have filed against China. (Link) But, we have also had the most complaints filed against us of any nation, 129, and have lost 89% of these. Here are a few comments from the U.S. Chamber of Commerce concerning the WTO.

Elsewhere around the world, France AgriMer has updated a few numbers and is now projecting that corn stockpile in that nation for 2020/21 will rise to 3.1 MMT, up from 2 million this past year.  In turn, they decreased the ending stocks number for barley from 2 MMT to 1.4 and lower wheat ending stocks 100,000 Mt to 2.9 MMT.

Over in Ukraine, APK-Inform trilled the overall grain output by 1.7 MMT, taking it to 71.3 MMT.  Within this, the corn crop was trimmed 2.1 million, reducing it to 35.1 MMT.  Last but not least, the Russian Ag Ministry estimates that as of the 15th, harvest in that nation will have reaped 114.8 MMT, outpacing last year by 17 million.  Thus far, the average yield for all crops has been 2.93 mt per hectare, compared with 2.81 last year.

We are witnessing a nice rebound in the bean market this morning and a bounce in corn to a lesser extent.  While nice to see, I continue to believe we are stretching this move about a far as would seem reasonable at this time.  Could the Baltic Dry market be giving is a clue that export trade could be on the wane in the not too distant future?