Rural Voice September 19, 2019

It appears that the US and China have made a little bit of progress in respect to trade, especially regarding some key US agricultural commodities.  While a general trade agreement and long-term deal continues to be elusive, short term deals have supported trade of US pork and soys into China.  The US has delayed issuing more tariffs on $250 billion of Chinese goods until at least mid October, and China in turn has exempted some US imports from tariffs likewise.  The outcome of these short term negotiations have been China purchasing US beans and expectations are for pork to increase substantially with reduced tariffs.

 Recently Chinese officials arrived in Washington, for the 13th round of trade negotiations.   Media reports indicate that China’s focus is to push for continued short term settlements and deals, while the US is holding out for long term, enforceable, and comprehensive trade agreements, that first and foremost protect US intellectual property.   

The same rhetoric continues out of Washington about Chinese trade.  President Trump has recently stated that there may be a deal soon, or maybe there won’t be a trade deal till after the US election.  While his message is non-committal, current comments indicate that the US administration would like a deal shortly.  President Trump recently said: “China thinks I am going to win (the US election) so easily and they are concerned because I told them: ‘If it’s (trade deal) after the election, it’s going to be far worse (for them) than what it is right now.’  I told them that.  Would they like to see somebody else win?  Absolutely.”  Trump indicating that China would be better off with an agreement now versus later.  While the US may desire a quick resolution, China may not have the same interests.  With the recent US soybean purchases they are getting closer to having their needs met until Brazilian beans are available next February.  For soybeans China may have been able to get all they needed to fill in their gap, and now they can delay resolution to the trade issues. 

China has recently been purchasing about half of all US pork exports with tariffs in place.  When tariffs are removed expectations are for Chinese imports to pull US pork exports to record high levels.  China needs the pork, as they report almost a 40% reduction in hog numbers.  China is not alone in this problem, recently South Korea, the 4th largest consumer of pork, has also reported an outbreak. 

 

 

Market sentiment has been demonstrating that there is a high level of confidence that the majority of the US crop will finish and mature.  The late planting this year has caused concerns about maturity and questions abound as to what the final yields will be.  There is no shortage of debate.  Overall producer sentiment is not aligned with today’s market sentiment, and there are very few growers that are not suspect about high production estimates.  Growers don’t have to go far to find evidence in support of their suspicions.  There isn’t anyone in our region and in much of the surrounding states, that does not know of unplanted fields, late maturing crops, poor looking stands or fields with large drowned out holes. 

The result of these diverging expectations is very limited farm selling.  Producers are reluctant sellers as they don’t like the prices, and they do not want to sell further bushels forward, not knowing what their final yields may be.  Many producers have grain currently sold for new crop and would like to know that these commitments will be filled, before selling further.  The result of this market condition is for basis levels to be extremely high in grain commodities.  Old crop basis will see a big drop, especially in corn, when we converge crop years at harvest.

The crop is seeing good weather to finish and adding maturity to the crop.  Whether this will be satisfactory or not will not be seen until the combines roll.  How important this late portion of the growing season will be depends on planting date.  For example, if planting occurred on May 15th in the London area, one model shows that you would have received just shy of 2800 corn heat units.  For this same area planting on June 10th you would have only received about 2400 corn heat units.  At this time of the year heat unit accumulation is running about 24 heat units per day and falling.  Therefore if a grower grew 2900 heat unit corn in the London area and planted mid May, he/she should have no concerns about their crop finishing.  On the other hand, the grower who didn’t get planted till mid June, they are looking for over 20 more days at minimum before the crop finishes.  This is of course the corn that everyone is concerned about and causes the bullish price expectation, along with some very poor ear sizes.   Forecasts are for a generally good fall but will it be enough to get test weight and yield in these late fields?

There is currently an expectation that Ontario will have large wheat plantings this fall.  This outlook of course is weather dependent.  A lot of the summer fallowed ground will see wheat planted, as long as rains don’t hamper planting on these heavy soils. 

 

 






 

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