With an absence of export news serving as a backdrop, US-China trade headlines again roiled the US grain markets on Tuesday. Grains quickly gave back weather-related overnight gains once the regular session resumed trading at 8:30 am as a newswire report that suggested China & the US were at an impasse in trade negotiations sent grains to morning lows. With record flooding in the Missouri River Basin raising the potential for unplanted acreage, markets posted late-session recovery after Pres. Trump asserted in a news conference that US-China trade talks “are going very well.” Following a session where highs were set overnight & lows reached at midday, grains settled little changed. At Tuesday’s close, May corn futures ticked 1/4c lower, Dec. corn edged 1/2c higher, May beans was down 1.75c, Nov. beans declined 3/4c, May soymeal rose $1.00/ton, May soft red winter wheat inched 1/4c lower & July SRW lost 3/4c.
Following Tuesday’s market close, the Wall Street Journal reported that the US trade team will head to China next week to meet with Chinese Vice Premier Liu He with the aim of finalizing a trade deal by end of April. Although telephone & email discussions have been ongoing, it will mark the first face-to-face talks since Pre. Trump delayed the imposition of additional tariffs that were threatened to go in effect on March 1. While progress has reportedly been made in many disputed areas, the WSJ report indicated there remain a number of unresolved issues. China is reportedly seeking the removal of all US tariffs, including the $50 billion imposed as a penalty for past alleged theft of intellectual property. China also wants to reserve the right to impose retaliatory tariffs if the US applies tariffs on Chinese goods. The US is seeking better protection for intellectual property, fewer Chinese state subsidies that cause it to overproduce & depress global prices, fewer Chinese rules on foreign companies, an end to the forced transfer of US technology to Chinese joint-partner owners, & approval of cross-border data flows that would allow cloud computing servers to be located outside of China. With the list of sticky issues still quite long, grain markets traded skeptically & quietly on both sides of unchanged overnight. At the 7:45 am pause in electronic trading, May corn futures were up 1c, Dec. corn was 1/4c higher, May beans declined 1c, Nov. beans were 1/2c lower, May soymeal was down $0.90/ton, May SRW wheat was 1.75c higher & July SRW wheat up 1c.
In export news, USDA did not report any daily export sales on Wednesday—the seventh straight business day without an announcement. Grain merchants report that Taiwanese flour millers will seek 4.042 mb of US wheat on Friday for shipment from US Pacific Northwest ports between May 10-June 7. South Korean feed mills are in the market on Thursday for 19,000 mt of palm oil meal for July delivery. At the same Tuesday news conference following the meeting of President Trump & Brazilian President Jair Bolsonaro that Trump said trade talks with China are “going very well,” it was announced that Brazil & the US have agreed to steps that will lower barriers to each other’s goods. Brazil will allow the US to export up to 750,000 mt (27.558 mb) at zero tariffs & the two nations agreed to “science-based conditions” to allow US pork exports to Brazil. The US also agreed to send inspectors to Brazil for a “technical visit” to audit Brazil’s beef packing inspections system. That could lead to a resumption of Brazilian beef exports to the US that were halted following reports of tainted meat & lax packing plant meat inspections.
In production news, the Brazilian soybean processors association, ABIOVE, lowered their 2018/19 Brazilian soybean production forecast by 1 mmt to 116.9 mmt on Tuesday, but boosted their 2017/18 bean output estimate to 123.1 mmt. In its March 8 WASDE report, USDA pegged 2017/18 Brazilian soybean production at 120.8 mmt & 2018/19 output at 116.5 mmt. ABIOVE sees 2018/19 Brazilian soybean exports at 70.3 mmt (USDA: 79.5 mmt) & crush at 43.2 mmt (USDA: 42.7 mmt).
In ag-business news, Bayer AG was dealt another legal blow on Tuesday as a San Francisco jury held that company liable for a Roundup-induced second incidence of non-Hodgkin lymphoma cancer. Eight months ago, a different jury had awarded a $289.2 million verdict to a plaintiff in a similar case. A judge later lower that penalty to $78.5 million. Liability & damages for the current case will be decided by the same jury in deliberations that resume on Wednesday. Bayer AG, which denies that glyphosate-based Roundup causes cancer & points to more than 800 regulatory studies & 40 years of usage as proof, acquired Monsanto & its potential liabilities for $63 billion in 2018.
Locally, corn basis declined 3c, soybean basis plunged 10c lower, & wheat basis was steady on Tuesday. Basis levels were under pressure on two fronts Tuesday as difficult high-water river conditions pushed barge freight higher even as Gulf bids for soybeans were sharply lower. The biggest risk for soybean basis remains that China has bought more than 400 mb of US soybeans, but has shipped only about 145 mb of them so far. If trade negotiations between the US & China fail, those sales could be at risk of cancellation in a worse case scenario.
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"Closing Comments" are written by David Marshall, First Choice Commodities LLC, Nashville, IL. To learn more about his farm marketing advisory or commodity brokerage services, contact him at email@example.com or call (618) 327-4370 (voice/fax) or (618) 314-0918 (cell). This commentary is not intended for specific trading strategies. We strive to insure this information is reliable, but we cannot guarantee its accuracy or completeness. Commodity trading involves risks. You should fully understand those risks before trading.