As high-level trade talks are underway in Beijing this week between the U.S. and China, commodity markets are watching carefully, said an analyst following the Chicago Board of Trade.
“All eyes are on March 1,” said Steve Georgy of Allendale Inc.
Should negotiators fail to make any progress toward resolving the U.S./China trade war, the U.S. is set to hike tariffs on Chinese imports from 10 per cent to 25 per cent on March 1.
Until then, any tidbit of positive news from trade talks has pushed the markets up a little and any negative news has pushed it back down, said Georgy.
One good news story which helped the markets this week, he mentioned, was that U.S. lawmakers came to a bipartisan agreement to avoid another shutdown of the federal government.
Just ahead of their Friday deadline, Democrats and Republicans agreed to partially funding a wall along the U.S./Mexican border at an amount far less than the $5.7 billion President Donald Trump has been demanding (all figures US$).
“That hope and optimism that this is going to be OK, that we’re going to get through this weekend without a shutdown, helps support stocks,” Georgy commented, noting the positive effect on commodities wasn’t quite as strong.
Meanwhile, South America’s harvests and its second growing season have been having a neutral effect on commodities in the U.S., he said.
“It’s their weather right now that’s really being focused on, especially for their corn and beans. They’re in this growing period right now where they’re getting moisture in Brazil where it’s needed. They need to see less rain in Argentina,” Georgy said.
Another neutral effect on commodities was the world agriculture supply and demand estimates (WASDE) from the U.S. Department of Agriculture. Although data hit all expectations, there was little change on the markets, Georgy said.
But there was almost a major spark in commodities markets as USDA lowered its yield projections for corn, he added. However, the lack of ethanol exports doused any such reaction.
USDA also lowered its projections for the amount of soybean acres farmers are expected to plant in 2019, but Georgy said that could change.
“If we get a rally in bean prices, we could get more bean acres than what we think,” he stated.
Otherwise, U.S. farmers are expected to boost their corn acres.
— Glen Hallick writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.