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The Grain Market Hits a Lull, Analyst Says
The past few weeks have brought a lull to the grain market, with most grains flowing lower since mid-October.
The weakest of all the major markets is corn, which has lost 25¢ in that time frame. Soybeans are down 38¢ since 10/14, and Dec. wheat down 17¢ (since 10/21 highs). So, grains have definitely shown weakness in the past month.
The primary reasons are likely the improving harvest weather during that period, with very cold but dry weather over much of the U.S. that allowed harvest of crops on some very wet, soggy soils. Also during that time, the U.S./China trade agreement has stalled – first from the cancellation of the event in Chile where Trump and Xi were going to sign the first ‘Phase 1’ agreement, and then from disagreement over peeling back existing tariffs.
Rumors abound now on the China-U.S. trade negotiations, with China’s announcement last week that tariffs would be peeled back equally as part of the ‘Phase 1’ trade agreement (which the U.S. did not confirm). However, what does that mean? The U.S. had plans to tariff the full $500 billion of Chinese imports, and China tariffs about all of the $150 billion of U.S. imports.
So, peeling back tariffs equally means what? Is it a 3-for-1 peelback (likely the China view)? Or, a 1-for-1 peelback (the U.S. view)? I guarantee you China wants the U.S. to peel back $15 billion tariffs for every $5 billion China peels back.
And China wants it on all tariffs.
In fact, economic studies show a trade deal is three times more valuable to the Chinese economy than in the U.S.
U.S. weather was relatively favorable the past month. Perhaps our luck is ending, though, as forecasts call for another week or so of cold and dry weather for the central and eastern Corn Belt, while the western half of the U.S. enjoys above-normal temps.
There was a snowstorm that went from the Great Lakes to northern New England yesterday, November 11, with flight delays in Chicago along with record-cold temps. Chicago got a few inches of snow Monday, with Buffalo 6-10" and Vermont 7-12" – kind of a wakeup call that winter has arrived.
More precip is falling, today, from Texas to Maine in some very cold conditions for November. More fun for everyone! Farmers haven’t liked the snow nearly anywhere. However, the cold weather has allowed farmers to harvest soybeans on soggy soils, allowing more of the crop to be harvested on otherwise unharvestable, wet soils.
The eight- to 14-day forecast turns warmer and wetter, but warm in November is still cold. And wet in November when we don’t normally get much precip is still not very wet. But when it comes in snow, .1" becomes 1" or more of snow, and we don’t need any snow right now to slow harvest.
Crop progress will come out this afternoon, as the Veterans Day holiday was Monday. I was reminded this weekend that no protester gave us freedom – it was a veteran. No preacher gave us religious freedom – it was a veteran. No reporter gave us freedom of speech – it was a veteran. No politician gave us democracy – it was a veteran. So, thank our veterans for what they have done for you.
Ray can be reached at firstname.lastname@example.org.
Ray is President of Progressive Ag Marketing, Inc., a top Ranked marketing firm in the country.
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