It was a volatile time for the ICE Canola market for the week ended Nov. 30, as oilseed traders anxiously awaited news from the weekend’s G20 summit in Argentina.
United States President Donald Trump met with Chinese President Xi Jinping on Saturday, Dec. 1. The two reached a cease-fire agreement where they will hold off on raising tariffs for 90 days while they negotiate. China also agreed to start buying U.S. agricultural products again. Chicago Board of Trade (CBOT) soybean contracts were up sharply at market open on the night of Sunday, Dec. 2, supported by the positive development with China.
In the days leading up to the meeting trade was choppy for oilseed markets. Earlier in the week CBOT soybean contracts shot up substantially as many believed a deal would be reached. Later on in the week it quieted down with the market bouncing around awaiting the meeting.
While all of this was going on, news out of China continued to look dire for the country’s hog industry. The ongoing African swine fever outbreak has forced the country to cull more than 600,000 hogs, and a recent outbreak of foot and mouth disease also caused China to cull around 300 hogs. The reduction in the country’s hog herd will mean less need for the country to buy soybeans, thus reducing its reliance on the U.S.
Another factor playing in China’s favour to reduce its dependence on U.S. soybeans is the estimated large soybean crop in Brazil. Reports out of the country have seeding ahead of schedule and with good weather expected for the next few weeks the fast pace should continue. Many are already predicting a record crop there with an early harvest, which has many expecting China will be able to hold off on buying any U.S. soybeans until Brazil’s harvest.
Between China’s reduced hog herd and Brazil’s soybean crop, many have started to view China as having the upper hand over the U.S. on this issue in regards to the trade war. A recurring theme that has surfaced lately is the permanent effect the trade war will have on changing trade routes as new relationships are formed between countries.
Corn futures for the most part found themselves at the mercy of soybean futures, taking wide jumps the same as soybeans throughout the week.
Wheat futures were also volatile during the week. They did see upward support earlier in the week as a snowstorm hit the U.S. Midwest leading to trouble for winter wheat acres. The final crop report from the U.S. Department of Agriculture released Nov. 26 showed that 95 per cent of the U.S. winter wheat crop is seeded, which is below the five-year average. The snowstorm put a halt to seeding and some acres are expected to go unseeded due to it. The snow also had many concerned it could cause damage to already seeded acres.