Although the bulls are doing their best to get positive news in the market, the bears are predominant. The coronavirus has a firm grip on global markets. In the US grain market, the fact that the China deal has continued to generate trade has also contributed.
After the outbreak of the coronavirus became known, the American soy price recorded 9 consecutive days of losses. The largest decline in 6 years. Soy prices have been negatively influenced by China for some time. The pig herd decimated by swine fever needs much less feed. That also dampens the mood. On Friday, February 7, the CBoT finally closed slightly higher again.
Finally trade?
Signing the Phase-1 deal has still not yielded any trade for the US. As a result, confidence in this continues to decline. China sees soy prices falling and can benefit from this. Acting now costs money. The government announced at the end of last week that import tariffs will be reduced on Friday, February 14. According to the White House, Chinese President Xi has told Trump that the country is keeping its promises and that the coronavirus has no impact on the agreements.
That gives the bulls new hope. The bears are waiting. On Monday, February 10, the price reacts positively, with a small plus. American soy exports are ultimately a quarter higher than last year. A volume of 26,8 million tons is still below what was hoped. Maize meanwhile scores 50% below last year's level.
Corn market open to the world
Initially, the Chinese promised to purchase $40 billion worth of raw materials. There are now serious doubts about this due to the coronavirus. Things are also not going well for the Americans when it comes to the corn trade. Due to the trade and currency advantage, Ukraine and South America have capitalized on Chinese demand. Almost 60% of imports come from this part of the world. As before written it is a choice between two evils for the American arable farmer in the Midwest.
It is possible that the Wasde report from the US Department of Agriculture will bring about a change on the stock markets. This will be published on February 11. It will be quite a challenge to get over the fear of corona. In any case, the Wasde report ignores this subject, as the USDA already announced. It focuses on the statistics. For example, those from South America.
Favorable harvest South America
Mainly positive news comes from Brazil and Argentina, due to favorable weather conditions for sowing and the growing season. Analysts speak of 123 to 125 million tons of soy in Brazil, which represents a record. Argentina has been able to sow its entire soy and corn area due to good weather. That also hints at a larger harvest. The Buenos Aires Grain Exchange has upgraded its forecast for soy by 2,5 million tonnes; up to 53,1 million tons. A new export record of 38 million tons is expected for corn.
Brazil is suffering from this increased export. Ukraine has also lost market share (a third more sales on all types of grain). Lower Brazilian corn exports are therefore estimated for 2019-2020.
More wheat imports
The supply problems of soy and corn in China have caused the wheat price on the country's futures market to reach its highest level in 9 months. The EU is actually reaping the benefits of this. France exported 1,3 million tonnes to the country since July last year, compared to an average of 29.000 tonnes in the same period. Perhaps the American farmer should look more for spring wheat.