Since last week’s superpower meeting, the ag market has gone on something of a tear. Wheat was up 30¢/bu, corn up 5¢/bu and soybeans up 58¢/bu. Wheat has benefited from recent rumours of Chinese purchasing interest, but it was soybeans that always had the most to gain should China re-enter the US market. And so it seemed. The headlines indicated that China had agreed to purchase 12mmt this season (albeit in a very narrow time slot) and would also return for a further 25mmt each year for the next three years.
COFCO was the first off the bat, buying 150kmt of US beans, the first this season, and a very welcome sign for US farmers staring at a mounting pile of soybeans at their local elevator. However, since then, crickets. Patience finally ran out last night when it became evident that rumours of Chinese interest were just that.
The caveat to any agreement was that China would purchase US origins if market conditions dictated. In short, if the price was right. Since the meeting, two things have happened. US soybeans increased in value in anticipation of extra demand, and Brazilian soybeans decreased in anticipation of extra competition. China has removed some of the additional tariffs on US soybeans and will remove all retaliatory tariffs on wheat, corn, sorghum and chicken from 10 November, which could remove some of the financial hurdles in place.
Wheat is in an interesting place. We had seen four straight positive sessions this week as rumours circulated of China doing some US wheat business. As the week progressed, hopes dimmed and last night wheat ended up leading most of the ags lower. The 120kmt purchased was far short of the 500kmt some estimates had pencilled in.
The imminent removal of the reciprocal tariffs will make US wheat more attractive, but the question will be whether it is enough for the Chinese to turn their backs on Australian wheat, which is priced very competitively. The last USDA report stated that Chinese production was around 140mmt, with imports estimated at 4mmt. Earlier in the year, key wheat-producing regions encountered really tough seasonal conditions and raised questions over production potential. Total imports by China will be very closely watched, as they may also give us insight into how this season’s waterlogged crop is progressing.
Next week
The US–China story is not over yet, and we are still waiting on the final signed agreement to be released. The removal of some of the trade tariffs should allow for some more ‘open’ trading. Australian and Argentinian harvests have begun, with expectations of large crops needing to find homes.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released its December Crop Report last week, and it came with some serious bumping
Another ‘geopolitic’ type of week, with little fundamental news but lots of political intrigue to keep the market ticking over. News that the US President
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Rally fades as reality sets in
COFCO was the first off the bat, buying 150kmt of US beans, the first this season, and a very welcome sign for US farmers staring at a mounting pile of soybeans at their local elevator. However, since then, crickets. Patience finally ran out last night when it became evident that rumours of Chinese interest were just that.
The caveat to any agreement was that China would purchase US origins if market conditions dictated. In short, if the price was right. Since the meeting, two things have happened. US soybeans increased in value in anticipation of extra demand, and Brazilian soybeans decreased in anticipation of extra competition. China has removed some of the additional tariffs on US soybeans and will remove all retaliatory tariffs on wheat, corn, sorghum and chicken from 10 November, which could remove some of the financial hurdles in place.
Wheat is in an interesting place. We had seen four straight positive sessions this week as rumours circulated of China doing some US wheat business. As the week progressed, hopes dimmed and last night wheat ended up leading most of the ags lower. The 120kmt purchased was far short of the 500kmt some estimates had pencilled in.
The imminent removal of the reciprocal tariffs will make US wheat more attractive, but the question will be whether it is enough for the Chinese to turn their backs on Australian wheat, which is priced very competitively. The last USDA report stated that Chinese production was around 140mmt, with imports estimated at 4mmt. Earlier in the year, key wheat-producing regions encountered really tough seasonal conditions and raised questions over production potential. Total imports by China will be very closely watched, as they may also give us insight into how this season’s waterlogged crop is progressing.
Next week
The US–China story is not over yet, and we are still waiting on the final signed agreement to be released. The removal of some of the trade tariffs should allow for some more ‘open’ trading. Australian and Argentinian harvests have begun, with expectations of large crops needing to find homes.
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Data sources:CRM Agri, Reuters, SovEcon, Next Level Grain Marketing, Mecardo
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Have any questions or comments?
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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.
MEET THE TEAM
Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
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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.