The United States and China have reportedly concluded trade talks, so a deal appears to be in sight. That affects the grain market, but how much? The rainfall in Argentina also affects the markets.
The United States (US) and China have completed their talks and the outcomes are said to be positive. This mainly affects the soybean market for the time being, but it could eventually affect the wheat market as well. Arlan Suderman, analyst at INTL FC Stone, argues that the US will continue to have a soybean surplus anyway.
He cites overproduction in both North and South America as the reason for this. In the long term, despite the positive reports about the trade war, Suderman expects a downward trend for soybean prices. Also because in China it is expected less food will be used, which is caused by African swine fever.
Major purchases by China?
Persistent rumors that China would purchase 8 million to 12 million tons of corn and 6 million tons of wheat could significantly impact the corn and wheat markets. The wheat quotation on the CBoT in Chicago has shown a slight increase in recent days. However, this mainly stems from concerns about the wheat crop in Argentina, due to excessive rainfall. The weather forecast is also rainy in the coming days, putting the grain harvest at risk.
What stands in the way of a rise in wheat prices is the theoretical global wheat supply of 18 weeks of consumption. That is seen as more than sufficient. About half of this is in Chinese hands. As soon as insights about the ending stock change, this can cause price movements.
At the end of the week, the United States Department of Agriculture (USDA) will publish its expectations for world supplies. Due to the shutdown, the publication of this will be delayed. Traders expect that wheat stocks have increased. In contrast, global corn and soy stocks are expected to decline.