Of all the bits and pieces of news from regional, national and world sources that I encountered this week, the one that keeps rattling around in my head is the comment by Alan Brugler in his Successful Farming/AgMobile piece Jan. 29. He quoted the Comstock Report as saying, “Over the weekend former President Trump” stated “the need for much tougher trade policy with China.” The remark has been “characterized as threatening a ‘new trade war’ with punitive tariffs on Chinese imports near certain to invite retaliation.”
Just what we need. Farmers lauded Trump for his protracted negotiations to create a trade agreement with China that greatly boosted our exports to that country. For 20 years, I went to regional and national grain meetings that frequently included market prognostications. Always the theme was if we could just get China to buy grain, their need for large amounts would significantly change our price levels.
Finally, the grain deal brokered by Trump’s representatives bore fruit for what we may look back on for a long time to remember as the best days of farmers’ markets. Now different politics may be leading to a complete change of fundamentals in China trade.
China still needs grain, but the evidence is that they are shuffling the grain deck to allow purchases from other nations. They now prefer soybeans from Brazil and from Argentina when Argentina has a normal crop.
Now comes the news that China has changed its policy to allow the import of Argentine wheat. This hit the market with a vengeance Jan. 29, and the different classes of wheat led the markets lower.
Grain prices
Last week at this time, we were speculating that corn had a chance to stay above $4.50. That hope came after we bounced back from a low of $4.36 3/4 Jan. 18. In fact, we rallied slowly for a week, to the Jan. 25 high of $4.53 1/4. But, Jan. 29, we lost a net six cents for the day, and we were most recently trading (10:20 p.m. Jan. 29 on the overnight trade) at $4.38 3/4. And, we are trading fundamental news that is negative to the market.
Those fundamentals come from the Buenos Aires Grain Exchange. They raised estimates of the corn and wheat crops above what was just reported a few days ago in the World Agricultural Supply and Demand Estimates report from the U.S. Department of Agriculture.
The market seems to believe the numbers from the horse’s mouth. The rumor mill said that South American soybeans got so cheap last week that a cargo was sold for export to our Southeast. This had been anticipated, as our supply and demand balance sheet is really tight on soybeans, and because it is normal to see South American soybeans come to Charleston in tight years. However, we thought this could happen in July or August and it is still January as I write this.
The one good spot of news was in the corn, where exports were up 21% for the week, ahead of last week. It was also two-thirds more than the same week last year. We have now shipped 615 mbu of corn in this marketing year, which is almost a third better than last year at this time.
As for other South American corn news, the first crop corn is being harvested, and is 15.3% done, ahead of the 10.2% average. That can be construed as negative, as is the fact that BAGE has raised their estimate of the crop production for the year to 56.5 MMT, a 1.5 MMT bounce.
The soybean news was mostly negative for us. BAGE estimates that 98% of the Argentine soybeans are planted. That would be good for them, but it is offset by the crop condition ratings there. There has been a sharp drop in condition in one week, due to hot and dry weather. Only 44% of the crop is rated good/excellent and 8% is now rated poor. Last week only 2% was rated poor.
It is easy to get confused about the crops of Argentina versus Brazil. Until now, it is Argentina that has had its crop cut by hot and dry weather. Since soybeans in South America are grown over a vast change of latitude, we are talking about 98% of the Argentine soybeans are now planted, while at the same time, the Brazilian harvest is now 9% finished, mostly in the north.
Even before China decided to use Argentine wheat, there were wheat conditions and exports affecting the market. Almost 265,000 MT of wheat of all classes was exported last week. That was down from 315,000 the week before and was 181,000 less than the same week last year.
So, most news this week is negative for our prices. This could mean that the worst news is in the market, and we can look forward to improvement in prices. Or, the trend of negative news could continue to erode prices. One thing is sure, we are not profitable with soybeans under $12 and corn prices under $4.50.
