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Ag Markets Keep Eyes On Trade Tariffs, Analyst Says

Weather is important, but trade tariffs trump all other factors.

President Trump campaigned on the slogan "Make America Great Again", but like most President's before him, most US citizens expected that this was just a campaign slogan to get elected. 

Typically politicians don't do what they say, they just say!  Or, as one former ND Representative said, "When all is said and done in Washington, a whole lot more is said than done!"

So, politicians typically make all kinds of promises on the campaign trail, but rarely did many things actually change.  This new President is different, as he was actually a businessman most of his life, not a politician.  So he is actually carrying out in trade/protectionism most of what he said he would, much to the delight of many American-based businesses.  

But not agriculture!  Trade tariffs put on China were quickly met with retaliation tariffs on US grains (including soybeans $13 billion in trade). 

I think much of agriculture would have preferred that Trump said what he would do, but didn't get done any of his protectionist/tariff trade policy, as US agriculture is very export dependent. 

Trump didn't just say he was going to put America first, he is actually doing it by demanding a fair deal on trade from foreigners, or is slapping tariffs on them to try to get them to the negotiating table which began this year.    

One of those trading partners is China, who sells the U.S. over $500 billion in exports per year, while we buy about 25% of that amount back from them for a net deficit of around $375 billion (give or take a few billion).  The loss of the China soybean exports, where they buy about 60% of our soybean exports in the past (or about 25-30 million acres) is devastating!

But, so far, that has not deterred the administration, who yesterday at the White House had a "Made in America" product showcase of American made goods. 

During it, Trump stated, "The era of economic surrender is over!"  Then Pres. Trump tweeted this morning that: "Countries that have treated us unfairly on trade for years are all coming to Washington to negotiate. This should have taken place many years ago but, as the saying goes, better late than never!"   

Then 20 minutes later at 6:30 am added: "Tariffs are the greatest!  Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs.  It's as simple as that - and everybody's talking!  Remember, we are the "piggy bank" that's being robbed.  All will be Great!"  

While grains are paying attention to the crop conditions/weather, there is no bigger story and more important one to the market than the issue of trade.  Will it be tariff free?  Or more likely, what will the tariff/trade deals look like in the end?  These answers might be more important now to the market than the crop size (incredibly!).   While this is all being worked out, grain production agriculture is suffering tremendously.  

On the 2018 crop size question, weather has been very cooperative to producing another bumper crop thus far.  Weather forecasts are calling for a bit warmer temps in the 8-14 day forecast today, but otherwise similar to yesterday's forecast.  We still have an above normal precip forecast for the southern 2/3 of the Corn Belt the coming 7 days, with below normal temps in all of the Corn Belt which is good weather for July.  It's a below normal precip forecast for the northern 1/3 of the corn belt the next 7 days.

The 8-14 day precip forecast calls for above normal precip in the central and eastern Corn Belt, but below normal for the western Corn Belt.  Temps are forecast to warm to normal, no longer below normal, in the 8-14 day forecast.  
But still, this doesn't look threatening.   

Weekly crop progress continues to show an improving and above normal corn and soybean crop developing ahead of normal. 

Corn silking is 81% (19% ahead of normal), with 64% dough (19% ahead).  Conditions are steady at 72% rated G/E,
and the Pro Ag yield model rose about 1 bu/acre to 177.5 bu, which would be a record yield again this year and above USDA's 174 bu/acre. 

Soybeans are 78% blooming (15% ahead), and 44% podding (21% ahead).  Soybean conditions rose 1%
to 70% rated G/E, and the Pro Ag yield model rose 0.76 bu/acre to 49.6 bu/acre, now over 1 bu/acre above USDA at 48.5 bu/acre.  With these kinds of improvements, it's likely yields will be hiked in the August report (bearish).  

Cotton squaring is 78% (35 behind), with cotton setting bolls at 41% (4% ahead), with conditions dropping 2% to 39% rated G/E.  Sorghum is 42% headed (2% ahead), and 22% coloring (2% behind), with conditions rising 2% to 49% rated G/E.  
Winter wheat is 80% harvested, 1% ahead of normal.  HRS wheat is 96% headed (3% ahead), and 79% rated G/E (down 1% this week).  Barley conditions also dropped 4% to 81% rated G/E, and oats rose 1% to 72% rated G/E.  

Topsoil moisture is still rated 62% adequate/surplus (unchanged from last week), and subsoil also unchanged at 63% rated adequate/surplus.  With soil moisture still rated somewhat high, that is insurance in late July that the crop can't
get hurt too bad now into the year.  It looks like we have an above average crop, and is actually continuing to improve so it could even be record shattering yields in HRS wheat, corn, and soybeans.  With prices already low, you wonder how much lower we can go?


Ray Grabanski can be reached at  
Ray Grabanski is President of Progressive Ag Marketing, Inc., the top Ranked marketing firm in the country the past 8 years.

This material has been prepared by a sales or trading employee or agent of Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing's Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.


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