Market News

Lack of details on phase one mutes market response

Soybeans ended the Wednesday trading session lower with a lack of details about the new phase-one trade agreement with China. The agreement says China is committed to buy at least $36.5 billion of U.S. ag products in 2020 and $43.5 billion in 2021. The agreement was signed Wednesday and President Donald Trump says enforcement mechanisms are part of it. The USDA said China bought 4.6 million bushels of U.S. soybeans for the current marketing year, which will count toward the new 2020 total. Meanwhile, the latest weather forecasts in Brazil and Argentina are generally favorable for South America’s soybean crop.

Corn closed lower, which DTN calls a muted response to the signing of the phase-one trade agreement with China. Presumably, a large share of the purchases will be soybeans, but modest amounts of corn and wheat should also be included. Without the details, traders don’t know much more than they did Tuesday other than an actual deal has finally been reached after months of sorting through rumors. Thursday’s weather map shows snow in Minnesota and Wisconsin. Smatterings of light moisture are sprinkled around the rest of the central U.S. Moderate precipitation is expected in the central and Eastern Corn Belt the next five days. Bullish for corn is the Energy Department’s report that last week’s ethanol production increased to 1.095 million barrels per day, close to the highest ever recorded for one week.

Wheat closed mixed with Chicago higher and Kansas City lower. Domestic and world wheat supplies are plentiful, but U.S. wheat demand was better than expected in the first half of the marketing year. Wheat prices should have another month or more before traders start thinking about the next big world crop. DTN’s forecast this week for moderate precipitation in the central and eastern Midwest is supporting concerns about what soft red winter wheat conditions might be like in 2020.