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3 Big Things Today, August 22

Soybeans Lower in Overnight Trading; Economists Say China Will Eventually Turn to U.S. For Supplies.

1. Soybeans Decline Overnight on China Worries, Grains Fall

Soybean futures were lower in overnight trading amid ongoing concerns about trade between the U.S. and China.

While negotiators from the world’s two biggest economies are expected to start midlevel meetings today to try to end the trade war, there are signs that indicate the talks will not resolve all of the issues between the countries.

President Trump said in an interview with Reuters this week that there’s no time frame for resolving the trade dispute with China, and despite Chinese negotiators arriving soon in Washington, he doesn’t “anticipate much” from the discussions, the news agency reported.

Any resolution will take time because China is set in its ways, he said.

The U.S. is set to implement tariffs on another $16 billion worth of Chinese goods starting tomorrow, and while it’s not yet 100% clear whether that will happen due to this week’s talks, there are no indications that the Trump administration is backing away.

China has said it will implement duties on an equal amount of U.S. goods.

Soybean futures fell 4¼¢ to $8.81¾ a bushel overnight on the Chicago Board of Trade. Soy meal futures lost $1.40 to $325.80 a short ton, and soy oil lost 0.02¢ to 28.93¢ a pound.

Corn for December delivery decline 2¾¢ to $3.71½ a bushel overnight.

Wheat for December delivery fell 5¾¢ to $5.42 a bushel in Chicago, while Kansas City futures lost 6½¢ to $5.55¾ a bushel.

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2. China Likely Will Have to Turn to U.S. For Soybeans at Some Point, Economists Say

Despite the ongoing trade battle between the U.S. and China, it’s likely that the Asian nation will have to take oilseeds from the U.S. at some point, according to a report from two respected agricultural economists.

Carl Zulauf from Ohio State University and Gary Schnitkey from the University of Illinois said in a report that China will eventually have to turn to the U.S. for supplies, as South American importers likely will run out before their next harvest.

“China is expected to import some U.S. soybeans, as South American production will not likely become available in large quantities until sometime during February or early March,” the economists said in the report.

These so-called bridge imports likely will be needed due, in part, to Argentina’s poor crop that was harvested earlier this year. Drought curbed output, reducing available supplies from the country, according to the report.

The USDA said in its monthly Word Agricultural Supply and Demand Estimates (WASDE) Report that Argentina’s production in the 2017-2018 marketing year will fall to 37 million metric tons from 55 million the prior year, then jump again to 57 million tons in 2018-2019 – an indication of a very bad year for farmers in the South American country.

Output in Brazil, meanwhile, is pegged at 119.5 million tons in 2017-2018 and 120.5 million in 2018-2019, both records, according to the USDA. Whether or not record Brazilian production comes to fruition and how quickly it can get started on the crop will likely have far-reaching implications, Zulauf and Schnitkey said.

“If the China trade dispute is not resolved in the next couple of months, a short-run market implication is that 2018 U.S. soybean exports to China and probably in total will depend on how early northern Brazil plants, which is largely a function of when the country's rains start,” the economists said.

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3. Thunderstorms, Rain Forecast For Already-Flooded Parts of Nebraska, Iowa

More rain is expected in parts of eastern Nebraska and western Iowa today, which could exacerbate flooding along the Missouri River, according to the National Weather Service.

Isolated thunderstorms are possible late Wednesday, though they’re not expected to be severe, the NWS said in a report early this morning.

More storms are expected Thursday and Friday that could bring hail and strong winds to the area, and more precipitation is expected this weekend.

The Missouri River is already breaching flood stages in several spots along the Nebraska-Iowa borders, the NWS said. At Nebraska City, the river was at 19.6 feet, topping the flood stage of 18 feet in that spot, according to the agency.

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