Usually this misinformation revolves around supply, but its intention is to influence market prices. The best approach in understanding the real picture is to refer to the data.
The University of Illinois in their Farm Policy News (FPN), reported that last week was the largest sale of soybeans so far this marketing year was enacted. While 39% of this was to China, a further 39% was to “unknown”, with FPN speculating that this “very likely a lot/most to China” also
When combining other “facts”, the answer becomes even more obvious. Under the agreed trade deal between China & the US, China agreed to take $36.5 billion in American agricultural goods in 2020. In the first 4 months with the disruption as a result of COVID-19, only $4.65 billion was exported.
Both sides have said they have a commitment to honoring the phase 1 deal, so expect a ramping up of activity in the next couple of quarters.
In related news, FPN reported “The American Farm Bureau Federation on Wednesday sent a detailed list of recommendations to Congress to help farmers, stating that even though lawmakers had provided earlier aid, more is needed because of economic losses facing the industry.”
This aid is running into the billions, and with corn prices falling 50 cents per pound to around US$3.20, the National Corn Growers Association calculates a loss of $49 per acre, they are asking for more.
Subsidies are in the news at the moment, (see China barley tariff report) but the consequence of this US government support will be to incentivize US growers to plant, causing the supply demand message to be muted and the continuous high level of world stocks to remain.
The ASX Jan 2021 contract slowly eased this week to end 10 dollars lower at $288, while the US CME Dec 2020 contract pulled back further, ending the week just under $497.
Domestic delivered prices tended to firm this week as buyers sought supply while growers were cautious in accepting old crop pricing, with it still a month or two away before producers have the confidence to sell “new crop”.
Fact or fiction?
Next week
Weather is all important in influencing grain prices, especially at this time of the year the weather in the Northern hemisphere. This week the news from the US is that after a period of dry the forecast is for rainfall over the next 7 days is predicted, this had the expected result of causing the market to soften.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Data sources: USDA | Mecardo
Categories
Exchange rates helping wheat values
The exchange rate has been in the news lately, with the Australian dollar falling to a six-month low last week. Given this, we thought it
Argentina dealt a cruel hand
It has been a relatively benign week in the wheat market. Some of the risk premium that had built up over Middle East concerns has
Performance from pulses
Faba beans have become a popular break crop in southern states, delivering not only a valuable export or feed commodity, but also giving nutritional benefits
USDA offers up a vanilla slice
Last night, the market rolled back on itself after the USDA printed a very vanilla April WASDE (World Ag Supply & Demand Estimates) report. With
Want market insights delivered straight to your inbox?
Sign up to the mailing list to get regular updates to new analysis and market outlooks
Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
Research: Analysis of the Australian sheep flock
In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
SERVICES AND CAPABILITIES STATEMENT BROCHURE
We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.