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Optimism is growing about the grains longer-term now that the Phase I trade deal with China has gone into effect. Expectations are that they could make purchases soon. This is reinforced by China granting tariff exemptions effective March 2nd on 697 U.S. goods including ag products. However, as the old saying goes, we hear the talk, now show us the money! Looking at exports, inspections were a marketing year high last week at 31.3 MB with the pace of shipments rising 58 percent since mid-January. While that is good news, the bad news is that we must ship 44.3 MB each week to reach USDA’s projection of 1.725 BB. China, as well as our traditional customers, will have to buy a large quantity of corn for it to be reached.
We may be getting ahead of ourselves thinking that China will make large purchases of soybeans with the signing of the Phase I agreement as the impact of the coronavirus on their economy is still largely unknown. There are suspicions regarding the data China is releasing about its impact in that they may be downplaying its effect. One private source estimates China’s GDP will fall from 6.1 to 4.6 percent because of the virus. In other developments, a record crop looms in Brazil with their harvest 27 percent complete compared to 36 percent a year ago and 25 percent for the average. The dollar has risen 3.2 percent since late December making U.S. soybeans more expensive. Looking at exports, inspections last week were 36.4 MB with China taking 7.4 million. This was an improvement over the 3.6 MB they took the previous week.
Wheat rebounded early this week from reports of Australia lowering their production estimate to 15.2 million tons, the lowest since 2008. This compares to USDA’s estimate of 15.6 million tons. Additional support is being derived from expectations that China will be in the market for large quantities of wheat as part of the Phase I trade deal. Looking at exports, inspections last week of 18.4 MB were nothing to draw excitement. They must average 23.2 MB each week to reach USDA’s projection of 1.0 BB. We have not met the amount needed to achieve their target since mid-December.
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