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3 Big Things Today, June 20

Soybeans, Grains Rise Overnight; OCI Director Suggests China Use Less Soy Meal.

1. Soybeans, Grains Slightly Higher Overnight on Bargain Buying

Soybeans and grains were slightly higher in early trading, as investors seeking a bargain snap up supplies.

The price of beans fell to the lowest in more than nine years yesterday after President Trump instructed the U.S. Trade Representative to find another $200 billion worth of Chinese goods on which the U.S. could impose tariffs.

That sent markets spiraling amid fears that China will further curb purchases of U.S. soybeans. The move was the latest in a trade spat between the countries. China’s Commerce Ministry then accused the U.S. of starting a “trade war” and said it’s not afraid of a fight.

The sell-off, however, sparked some bargain buying, as some who were seeking supplies filled needs while speculative investors who’d bet on lower prices bought back their contracts and closed their positions.

Soybean futures for July delivery rose 1½¢ to $8.90¼ a bushel overnight on the Chicago Board of Trade. Soy meal gained $1.50 to $336 a short ton, and soy oil rose 0.26¢ to 29.11¢ a pound.

Corn futures rose 1¼¢ to $3.55 a bushel overnight.

Wheat for July delivery gained 5¾¢ to $4.83½ a bushel overnight, while Kansas City futures added 6½¢ to $5.05½ a bushel.

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2. China Can Use Less Soy Meal in Feed, Import From Other Sources, OCI Director Says

China can take certain measures to offset the lack of imports of soybeans from the U.S. that will help mitigate disruption to its livestock-feeding industry, said Jeffrey Xu, the managing director of Overseas China Investment.

“In case of China’s tariffs on imported soybeans, the country can adjust by reducing the use of soy meal in compound feed production via using more maize, rice, and wheat, and buying more from other origins,” Xu said during the International Grain Council Conference in London, according to the IGC.

Overseas China Investment specializes in freight brokerage of soybeans and feed grains, the company said on its website.

The U.S. last week said it would impose tariffs on $50 billion worth of Chinese goods, and China responded by saying it would put its own duties on imports of U.S. goods, including soybeans.

President Trump this week instructed the U.S. Trade Representative to identify another $200 billion worth of goods on which it could impose levies. China’s Commerce Ministry then officially called the ongoing spat a “trade war.”

But not everybody’s convinced Trump will be able to follow through on his threats. China simply doesn’t make enough domestic product on which the U.S. can impose $250 billion, or more, worth of tariffs, JPMorgan said in a note yesterday.

“There is not a single prominent Chinese brand that sells products in meaningful volume in the US,” the bank‘s analysts said. “China’s auto industry barely sells any units internationally. China has no major tech brands that export significant amounts of product. A substantial portion of China's exports are western products manufactured locally – Apple iPhones, Nike sneakers, etc. Thus, as Trump expands his tariff threat beyond $50 billion, it becomes very difficult to actually implement without harming American firms.”

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3. Flash Flood Watches Issued in Parts of Iowa, Nebraska, South Dakota This Morning

Flash flood warnings and watches abound in the central Midwest today after excessive rain fell in the area, according to the National Weather Service.

A flash flood warning is in effect for the area immediately surrounding Fort Dodge, Iowa, due to heavy precipitation. Some streets have been shut down due to flooding and low-lying fields likely will be overrun with water, the NWS said in a report early Wednesday morning.

A large stretch of land from southeastern South Dakota, most of eastern Nebraska, and the western half of Iowa are in a flood watch.

Most counties in both states along the Nebraska-Iowa border are under threat from excessive rainfall that’s pushing the Missouri River and its tributaries higher, the agency said.

“Recent rains have saturated soils in some areas and an additional 2 to 3 inches of rain in spots could lead to flash flooding,” the NWS said. “A slow-moving storm system will bring another round of rain and thunderstorms to parts of eastern Nebraska and western Iowa this afternoon and tonight.”

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