Content ID

277690

The U.S.’s No. 1 Soybean Competitor and No. 1 Customer Get Cozy

Analyst sees the markets eyeing international trade jostling.

Weather has cooperated more recently with harvest, allowing corn and soybean farmers to get a lot done the past week. 

Weather seems to be improving, with the next seven days forecast to have above-normal temps, but also above-normal precipitation (favoring the eastern half of the U.S.). 

The eight- to 14-day forecast calls for above-normal precipitation and mostly normal to above-normal temps that should allow harvest to get very close to complete in most states.  

The stock market seems to have stabilized at around 24,000 DOW, which is equal to the July low and represents a 3,000-point drop from early October. We lost in about three weeks in October what it took three months to gain, that 3,000 points or about 10%. This makes the stock market look worrisome, as it is one of the deepest breaks since Trump took office.  

Crop progress reports show corn harvest at 63% complete (equal to normal), and soybeans 72% complete (9% behind normal). We had a good week, harvesting 19% of soybeans and 14% of corn last week. 

Cotton is 44% harvested (1% ahead), and ratings actually rose 1% to 35% G/E (well below last year’s 55%). 

Sorghum is 53% harvested (13% behind normal), and sugar beets are 82% harvested (3% behind).  

Sunflowers are 33% harvested, still a large 12% behind normal. 

Winter wheat is 78% planted, 7% behind normal, and 63% emerged (4% behind normal), with conditions rated 53% G/E, just 1% less than last year.  

Overall, it looks like the improving weather at the end of harvest is allowing crops to get harvested, after a three-week delay, due to horrible harvest weather in September and early October. The improving weather the past two weeks was extremely important to dodge any bullet at harvest, and get the crop out of the fields before winter sets in. Certainly harvest losses were greater this year than normal, but it could have been much worse without the recent two-week improvement in weather.  

Moisture is still highly rated in all the U.S., with 87% rated adequate surplus in topsoil this week (the same as last week), and 81% subsoil rated adequate/surplus. These are much higher numbers than last year, and actually could be considered a bit bearish as it means much of the soil has adequate moisture to end this season and start next year’s season. Next spring, though, wet weather could delay planting more than normal since the soil is almost saturated this fall.  

Elections are this coming week in the U.S., and nowhere has the election been more volatile than in Brazil, our biggest competitor.

The South American country elected its leader Jair Bolsonaro, this Sunday, in a runoff election between him (a conservative) and the leftist Haddad, who took over leadership of the leftist party when the former leader was imprisoned. 

A month before the first election (they keep voting until someone gets 50%), Balsonaro was stabbed on the street in an assassination attempt that nearly killed the ex-Army captain. He had to continue his campaign from his home, directing his loyal followers to continue on wooing voters in their volatile political environment. This is the first swing back to a conservative, devout Christian politician Brazil has had in decades.  

President Trump called and congratulated Mr. Bolsonaro, and it sounded like they would have a very good relationship. However, this is our greatest competitor for Chinese soybean business, and the Chinese have courted Brazil heavily since the tariff wars began with the U.S. In fact, a Brazil delegation traveled to China within days of the implementation of tariffs, signing a long-term agreement with China to supply them with as many soybeans as they can before they went all out expanding soybean production in Brazil.  

So the posturing continues. We note that the U.S. began restricting U.S. firms from doing business with a Chinese chip maker that Micron has accused of stealing its secrets, according to the Wall Street Journal. 

Fujian Jinhua Integrated Circuit Co, a semiconductor startup, is the offending party that the Commerce Department has restricted U.S. business with, after Micron sued them in California court in December.  Fujian then sued Micron in China courts in January, and can you guess what a Chinese court will rule in that case against a U.S. company? This is exactly what the trade dispute is over, as Chinese companies can do almost whatever they want in China to U.S. companies with technological secrets.   

It is not fair play under a set of rules applicable to all companies that riles U.S. companies, it’s unfair treatment to U.S. (and other foreign) companies which favors Chinese firms by the Chinese government.  Most of the time, the Chinese government actually owns part or all of the Chinese company our companies compete against, as is true in the Micron case. It appears these issues are getting bigger, not smaller, as time goes on.

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

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