Morning Commentary - 12/04/2018

CBOT Retreats Overnight On Concern for Trump/Xi Handshake Trade Deal; Uncertainty Abounds

** CBOT 6:30 AM Grain Prices: Jan soybeans are down 1 cent at $9.0475, March corn is down 1.75 cents at $3.8025, and Mar Chi wheat is down 3.50 cents at $5.18.

 ** AgResource Morning CBOT Comment/Analysis: Overnight CBOT trade has been mixed to mostly lower in more normal volume. The markets continue to sift through US/Chinese comments on the weekend Trump/Xi dinner to gauge when China might lower their import tariffs allowing private traders to secure/import US soybeans? So far, there is no evidence that China is has changed its US tariffs, which contrary to comments from the Trump Administration officials.

  Increasingly it appears that President Trump and Chinese President Xi had a “handshake deal” to place a truce on further tariff action to try to negotiate a deal on intellectual and industrial property.    

  However, beyond the aforementioned points, its foggy as to what was really agreed to in terms of Chinese commodity purchases, the timing of the 90 day negotiating period, and what the US demands on IT protection from China?

  This is evidenced by the fact that late Monday, Larry Kudlow commented to the press that the starting point on the 90-day negotiating term was Jan 1st, only to have the White House correct him hours later saying it was Dec 1st. And China has made no mention of the 90-day negotiating period within their Gov’t media reports. The 90-day period and its starting point are still in debate!

  Finally, no seems to know where the estimate of $1.2 trillion of new Chinese demand came from? The Chinese have no knowledge of the number and doubts are emerging whether China will lower its tariffs to allow private ag imports. At best, there may be a token Chinese Gov’t purchase of US soybeans for their reserve. Most US commercial firms place that tonnage at 5 MMTs in both new and old crop US soybeans. Such demand is welcomed, but it would not change the landscape of the US ag markets, until a real trade deal is cut.   

  The CBOT markets will struggle to understand and ferret out what was agreed to in Argentina between the US/China? Not helping matters is that the US Gov’t will be closed on Wednesday for the funeral of President Bush. Until there is clarity on the details of China’s potential purchases of US ag goods, CBOT values will be in retreat. Our advice is not to chase rallies.

  Also in overnight news, ABARES reduced their estimate of Aussie wheat production to 16.9 MMTs which is more in line with private trade estimates.

**  North American 10 Day Snowfall and 15 Day Temperature Deviations:


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