Grain Exchange – An Early Christmas Present

Ag markets received an early Christmas present with announcement of phase one trade deal with China. The details of the deal are slowly being released. The agreement specifies $32 bil gain in agriculture purchases or $40 billion/year. The “when and how much” grain is the big question. It seems like China will make good faith effort to accelerate US purchases of soy, DDG’s, sorghum, bean oil, corn, wheat and pork.

Also in the news, USMCA was on the fast track to approval but hit a road block over labor issues included in the agreement. Trade negotiators met and cleared the issue. The House is expected to vote on the pact Thursday, but the Senate will not take up the legislation until later in January, after the impeachment trial.

Corn has rallied 17 cents in the last three days. Corn could have more upside potential if ethanol sales open up with China. December 2020 is now trading above $4.00 on the board. Tyson received clearance to ship poultry from all US plants to China. IEG estimates that China could purchase up to 330 million bushels US corn in 2020 for both food and ethanol use. This would translate corn futures trading closer to $4.20 in 2019/20 and $3.70 in 2020/21.

Soybeans futures are higher after US trade leaders reaffirmed the finalization of phase one trade deal with China. Argentina’s new government announcement of higher export duties on corn, wheat, soybean and soy products also contributes to the rally in soybeans. Soybeans also got a boost with the announcement that the new tax package included extending the $1 per gallon break for biodiesel producers, which expired the end of 2017. A lot of positive news is driving the rally in soybeans.
Wheat had an explosive session yesterday on news that Argentina is raising export taxes on wheat that could possibly increase US business. The prospect that China will increase US wheat purchases also fueled the fire. Wheat has gained 21 cents in the last 2 days.

There has been a lot of news to digest the last few days. As always keep in touch with your grain marketing specialist to work offers and take advantage of the rallying markets.

Wishing you a Merry Christmas and a happy and prosperous New Year.