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Optimism abounds from a statement by President Trump that he will sign an agreement with China on January 15th to purchase $40 bln of U.S. ag products annually. This would be a record. In 2018, China imported $127 of ag products which implies that a deal of this size is doable, but imports from other sources may have to be reduced. The question boils down to the degree of U.S. dependence they are willing to accept considering the history of geopolitical tensions between the two. Inking a deal could lead to a sizeable uptick in corn and DDG exports. Corn exports need all the help they can get as they are down 56 percent from a year ago. Inspections last week were 16.0 MB with the pace of shipments declining 12 percent since late November. Currently, shipments are on track for 1.7 BB versus USDA’s projection of 1.850 BB.
Soybeans continue to edge higher on optimism of signing a trade deal with China on January 15th. There has been so much media coverage and emotional energy surrounding a deal, it might be like letting air out of a balloon when it is finally consummated. To keep it from happening, the agreement needs to be above expectations as prices have risen over 8 percent since early December. Meanwhile, exports are sagging. Inspections last week were 33.4 MB with the pace dropping 28 percent since late November. China only took 10.3 MB which is down 75 percent from the high set in late November at 42.2 MB. As mentioned in a previous comment, when exports peak in November, they generally decline 60-80 percent until the end of the marketing year. That said, it is imperative that the agreement with China does not disappoint.
Wheat continues to gain ground on expectations that it will be a big beneficiary of a trade agreement with China. Expectations are that they might import 8-9 million tons a year. We could use it as exports are running short in reaching USDA’s projection of 975 MB. Inspections last week were 11.4 MB and must average 20.1 MB each week to achiever their target. Conditions remain dry in Europe which is offering support.
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