A recurring theme of many news notes and articles from ag market watchers has to do with the Phase One trade agreement with China. China committed to huge levels of imports from the U.S., and now observers have divergent opinions about their performance.
Ag exports to China were to be $36.6 billion this year. It should be noted that the plunging prices of the past couple of months makes that harder for the Chinese to make happen. That is, the low prices means that the dollar target require higher volume of trade to meet.
COVID complications
Now we come to a time when the COVID-19 crisis has the leaders of the two countries posturing about the blame for the virus. Ag observers worry that the rhetoric, especially by our president, will damage the chances of the trade agreement coming to fruition.
Trade comments currently have traders worried that the Chinese will continue to lag behind the volumes in the agreement but note that our trade officials are putting out the line that they expect it will, in fact, have the volumes in the agreement met.
A dtn.com article notes that of the $36.6 billion for the year, only $3.35 billion in goods has been shipped in the first quarter, 2% below the shipments of the first quarter of 2019. They say that industry sources indicate they don’t think the Chinese will complete the agreement.
There are arguments on the other side. The same article suggests that many of the Chinese are educated in this country, and they understand that much of the rhetoric coming from political sources is just grist for the election mill. Also, the article does not mention that the agreement was not signed until Jan. 15 and was not due to start for another 30 days. Thus, performance in the second quarter of the year is a better indicator of performance.
Depressed grain markets
The current grain markets remain depressed as a result of USDA supply and demand numbers which indicate higher production than many in the industry believe are valid. Adding to these fundamentals are the virus-created problems that have depressed most commodities. We have had a “perfect storm” of bad news for two months.
The perception of the impact of good planting progress adding to our burdensome supply is also limiting prices. We do not have the latest USDA planting progress report because of the Memorial Day holiday, but we were ahead of normal last week, and have had good progress this week.
The planting numbers do not tell the whole story, however. I am told that parts of Ohio are very wet and underplanted. This would include a large area near Circleville, Ohio, and some of the north-central portion of Ohio.
Locally, we got a couple of good days for planting, followed by a moist spell, and then more dry weather. The current forecast doesn’t call for rain until possibly May 28 and 29. Most of our crops in northeast Ohio will be planted by then.
Conference call
Monday mornings I get to participate in a conference call that involves ag professionals from all over the Midwest. This time of year it is fascinating what comes out in that call.
Most callers talked about how the crops had been planted for weeks, but some were starting to worry that soybeans had been frosted and would need replanting. Some reported spots that were too wet and had little planted.
North Dakota remains a problem, with May 26 having been the prevent plant date for them. Many still have last year’s immature corn in the field, with conditions too wet for the delayed harvest, let alone to plant again.
USDA is still working to get a handle on the production last year from North Dakota through Michigan, where 8% of the 2019 crop was not harvested before the supposedly final USDA crop production report of January.
