June 19, 2018

Wake Up Call

US Chinese Trade War Escalates

Good Morning! From Allendale, Inc. with the early morning commentary for June 19, 2018.

Grain markets are dealing with the prospect of an escalating US/Chinese trade war as new tariffs are threatened. The US crop continues to look great as reported by the USDA.

President Trump said Monday he's directed his administration to identify $200 billion worth of Chinese goods that will be subject to additional tariffs, escalating the ongoing trade dispute between the U.S. and China. Trump declared Monday that "further action must be taken to encourage China to change its unfair practices." As a result, he asked his trade representative, Robert Lighthizer, to identify $200 billion worth of Chinese goods that would be taxed at a rate of 10 percent. (The Hill)

US Corn was reported 78% Good to excellent by the USDA in yesterday's Crop Progress report. The number represents an increase of 1% over last week as well as the 77% trade estimate. Soybeans were reported 73% GTE, a drop of 1% from last week. The two crops were 98% and 97% emerged respectively.

Winter wheat was reported 39% GTE, an increase of 1% from last week. The crop was 27% harvested. Spring wheat was 78% GTE and 97% emerged.

Brazil's soy trading has practically ground to a halt as uncertainty over freight costs has kept buyers and sellers at bay despite expectations of stronger sales after an escalation of the U.S.-China trade fight, brokers and farmers said on Monday. Doubts about the price of shipping soy by truck in Brazil, now subject to government-imposed minimum prices after a nationwide truckers strike in May, have stalled grain trading and shipments, said Antonio Galvan, president of Mato Grosso grain growers association Aprosoja. (Reuters)

Export inspections for the week ending June 14th had wheat exports of 372,843 tonnes, corn 1,668,835, and soybeans of 818,396. The corn and soybean numbers were a bit above expectations.

Managed money funds were estimated sellers of 18,500 corn, 7,000 wheat, and 3,000 soymeal in yesterday's trade. They were estimated buyers of 6,000 soybeans and 2,500 soyoil.

The US Senate passed a defense bill yesterday which would keep the penalties against Chinese telecom company ZTE in place, despite successful efforts by the White House to negotiate their removal. Trumps progress with the company had been seen as a positive step in the larger US/Chinese trade negotiations.

Housing starts and Building Permits are the only economic reports out today at 7:30 AM CDT.

Moderately higher showlists this week, on top of last week's +29,100 head, are not doing much to help the bull cause for short term fundamentals.

There are a few weeks left of extremely profitable pork production margins left from high seasonal summer prices. However, it is likely we will be putting in a price top in the coming one to four weeks.

Dressed beef values were mixed with choice down .88 and select up 1.47. The CME Feeder Index is 141.28. Pork cutout value is up .32.

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