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Trade wars and dismal prices

By Doug Tenney, Leist Mercantile

While Ohio and Midwest producers may be in a good mood as to their yield prospects for corn and soybeans this fall, the mere mention of corn and soybean prices brings a protracted frown. Prior to the angst with all of the U.S./China trade war situation reaching a late May crescendo, December CBOT corn had reached $4.29 while November CBOT soybeans touched $10.60. Earlier this month, both made year-to-date lows as December corn touched $3.59 while November soybeans hit $8.26. Late July, December corn was $3.80 and November soybeans $8.90.

The announcement late July of no additional trade tariffs between the U.S. and the EU tore a hole in the bottom of the gunny sack accumulation of disappointing trade news that has dominated U.S./China trade tariffs headlines since May. That announcement was followed with a promise by EU President Junckner to buy “lots” of U.S. soybeans. Many could easily view that as disappointing as a defined amount of U.S. soybeans was not detailed. While that is true, you have to be excited that trade is actually being discussed. Granted, while the EU will fall short of importing the huge amount of soybeans, which is imported into China, this announcement demonstrates that U.S. trade is once again flowing into the EU. Expect that more and more announcements are in the offing.

Don’t be surprised to see numerous countries ink trade deals with the U.S. before the completion of our fall harvest. Some are somewhat optimistic talks between the U.S. and China could be happening shortly. Others feel that China has no choice but to be coming back to the U.S. to buy our soybeans. A timetable of that taking place is difficult at best to detail. Much has been made about the vast amount of U.S. soybeans not going to China at this time.

Timely rains the next few weeks will go a long way in determining final U.S. soybean yields. Last month central Ohio was beginning to feel the effects of needing rain with corn seeing the first signs of stress. Then with rains July 20 to 22, that concern was alleviated for corn as numerous producers labeled the rains, a “million dollar rainfall.” The Aug. 10 USDA monthly Supply and Demand Report will detail actual expected corn and soybean yields across Ohio and the Midwest. Late last month, some reports indicated the U.S. corn yield could be near 178 bushels or higher while the U.S. soybean yield may climb north of 50 bushels per acre. Last month the U.S. corn yield was 174 bushels per acre. Last year the U.S. corn yield reached 176.6 bushels per acre, a record setting yield two years in a row. Some are suggesting the U.S. corn yield could climb above 178 bushels this year. With that same report USDA had the U.S. soybean yield at 48.5 bushels per acre while last year the U.S. soybean yield was 49.1 bushels. Some are already anticipating that yield could climb above 50 bushels per acres.

Don’t be surprised that corn and soybean harvest will commence earlier than that of last year.

Corn demand could easily be ratcheting higher in coming months. Last month USDA raised U.S. corn exports 125 million bushels to 2.225 billion bushels. The export could reach last year’s level of 2.4 billion bushels. With reduced corn production in South America in recent months export demand should be shifting to the U.S.

Rains the last weekend of July were less than expected. At that time the two-week U.S. Midwest weather forecast was warmer and drier than normal. Both U.S. and world demand are tight.

Many feel corn futures have found a bottom during July. U.S. farmers and traders will be watching further details of the U.S. $12 billion dollar aid package. Dry weather in the EU and North China look to provide support for corn prices. The U.S. farm aid could slow farmer sales. As of mid-July, producers still have 2017 corn yet to move to grain facilities.

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