For a year, leading up to last January 15th, grain futures markets were at the whim of every last nuance of news and rumor about the pending trade agreement with China. We were told that the two parties would hammer out something within three months. 13 and a half months later we got a deal, widely trumpeted to mean a boom for ag prices.
The boom has not come, for several reasons. Now, on Monday night, came a shocking news article on my phone that quoted Peter Navarro, our trade negotiator, as saying the trade deal was dead. We were canceling it as punishment for the Chinese handling of the pandemic. The government view was that the Chinese caused the pandemic by keeping the news of the virus quiet for maybe as long as three months.
The Navarro article said that, even as the Chinese were signing the agreement, they were aware that thousands of Chinese were being allowed free travel all over the world, spreading the disease, while only the Chinese knew the danger. In retaliation to the way the Chinese acted, we were going to cancel the agreement.
U.S. farmers pay for foreign policy
Sadly, this story came just after Monday’s stories about negotiators disagreeing about China’s performance on the trade deal. Some sources said full compliance would never happen. Others said that at least the ag portion would work out as expected, especially since China needs our grain right now.
My immediate reaction was that markets would crash. My next reaction was that I was sick of watching U.S. farmers pay for foreign policy. Memories of Reagan’s embargo and Carter’s embargo are bitter to me, who personally, along with millions of others, paid the real price of these measures.
This morning my fears were confirmed, as I read that soybean futures were down as much as 14 cents overnight. However, that news was offset by the news that President Trump tweeted last night that “The China Trade Deal is fully intact.” Navarro is walking back his remarks, claiming they were “taken out of context.” Yeah!
Taken out of context?
It remains to be seen if Navarro’s comments were meant to scare the Chinese, or he went too far and is being corrected by Trump. Was there a misunderstanding between the two? There could be a game being played here, some Trump version of “good cop, bad cop.” If so, it is a dangerous game for those of us hoping that our contrary views will be confirmed with higher prices for grain. Some of us believe that USDA is over-estimating the crops of last year, and over-estimating the carryout for the end of this year, particularly in corn. If the trade is not up to the agreement, the supposed error in the government statistics will be the least of our problems.
At the current time, corn and soybean prices are down from two to three and a quarter cents. That is actually wonderful, given last night’s developments. Those changes come after a Monday market that had corn down almost four cents, but soybeans with only fractional changes, mostly on good crop conditions and expected rain. The gains also came after a week of small gains for both corn and soybeans.
Corn futures gained more than two cents on the week. That is a small gain, but corn prices have now gained for eight consecutive weeks. Soybeans closed higher for the fourth week in a row, and for the sixth week in the last nine. That’s the good part. The bad part is that, with the market lower today, the 23rd of June, July corn futures are trading just 3.25. July soybean futures are just 8.74.
As the hard wheat harvest in the Plains chugs on, with decent yields, but low protein, our Chicago wheat futures are trading at nine-month lows. July Chicago futures are below 4.84 at the moment.
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