As the next supply-and-demand report from the U.S. Department of Agriculture (USDA) is scheduled to be released Jan. 10, traders in commodities markets will spend the next several days positioning themselves.
The monthly world agriculture supply-and-demand estimates (WASDE) can set the tone in the markets for the next while, depending on its data. The belief has been that corn production numbers are very likely to drop because of the incomplete harvest across much of the northern Plains, especially in North Dakota.
In USDA’s last crop progress report for 2019, North Dakota farmers were only 43 per cent complete. It’s believed they pushed on as best they could until a recent blizzard put a stop to the harvest until spring. Regardless of how much was brought in last month, the fact is the corn harvest will have come up short.
A few days after the WASDE, the agricultural industry’s attention will turn to Washington, as the Phase 1 trade deal between the U.S. and China is to be signed.
In October, the U.S. and China had an agreement for Phase 1, but continued tweaking by both sides and the cancellation of the APEC Summit in Chile, where the deal was to be signed, saw it fall apart.
Markets have been skeptical toward this “second” Phase 1, and rightly so. Until the U.S. and China sign the agreement, it’s not worth the paper it’s written on — especially since China has been rather silent on the deal’s terms, and Vice-Premier Liu He, China’s top trade negotiator, is travelling to Washington rather than President Xi Jinping.
It’s widely believed that China is required to purchase US$40 billion in U.S. agricultural products, and that could include 35 million to 40 million tonnes of soybeans. Also, there’s been speculation that China could dramatically increase its purchases of U.S. wheat as well. However, until the ink is dry, the details are virtually a state secret.
Although we are now into 2020, the year’s tone, at least for the next little while, remains unknown until Jan. 10 and 15.