Grain prices were mixed over the past week. Soybeans are the weakest link, while wheat is showing the most strength.

 

The biggest “news” was the signing of Phase 1 of the trade deal between the US and China. One would think this should have been most supportive of soybeans, as that is by far the largest portion of China’s ag imports.

 

Perhaps it is the old theory of “buy the rumour, sell the fact”, as this has been talked about for over a year. Some analysts were also skeptical about some of the details that were released.

 

Apparently, China will buy an additional $32 billion in ag products over the next 2 years above what they purchased in 2017. That’s a lot of stuff! However, China also said imports would be based on need and market conditions.

 

Some wonder how much teeth the new agreement has. What if China doesn’t buy the quantities specified? China already has a bit of a reputation for not honouring contracts. Perhaps that’s why futures dropped since the signing?

 

China traditionally hasn’t bought a lot of US corn and wheat, but to reach the dollar figures in the agreement, they will need to buy a lot of those crops also. This should be supportive of those markets.

 

Wheat is also firm due to production problems in many of the exporting countries. There were rumours Russia was pulling itself out of the export markets, as the cupboard has supposedly run bare there. France, the largest producer in the EU, planted the fewest acres of winter wheat in 19 years due to a wet fall.

 

The US government announced the final one-third of the $16 billion in subsidies announced when the trade war started will still be paid out. It seems the US cares more for their farmers than any governments do on this side of the border.

 

China’s pig herd fell 27.5 percent in 2019 from 2018 to 310 million. As a comparison, there are about 75 million hogs in the US. China did expand its poultry flocks by over 10 percent to make up for some of the meat shortfalls.

 

Chinese pork imports from the US will remain strong and help them get to the trade deal targets. China continues to buy a lot of pork from Europe also. All this extra demand from China should support world pork prices through 2020.

 

Frank Backx

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