WINNIPEG, (MarketsFarm) – As fears of a world-wide pandemic of the COVID-19 coronavirus increase, the markets have been taking a beating, including the Chicago Board of Trade (CBOT), said Steve Georgy, president of Allendale Inc. in Fort McHenry, Ill.
“The perception is, it’s going to get worse, that trade is going to struggle,” Georgy commented, analogizing that trade is like a pendulum. “At some point it’s going to swing back and we’re waiting to see when that is.”
He suggested the markets are in the middle of that fear and panic, and it needs to play out before the pendulum can swing back.
Although the COVID-19 scare has been the major factor in recent declines, Georgy noted it’s not the only one.
There was a Bloomberg report on Feb. 19 saying that China was looking to purchase sorghum from the United States, which could indicate the beginning of China’s big spending spree on U.S. agricultural goods. Under the terms of the Phase One trade agreement, China is to purchase US$40 billion in U.S. farm products this year, but more than a month after the deal was signed those purchases have yet to start.
“It’s a good first step, but we need to see some larger products. We need to see soybeans or even pork. We just haven’t seen that type of purchase just yet,” Georgy commented.
Factoring into that is Brazil’s massive soybean harvest, which has entered the export market. Georgy said China often buys soybeans from Brazil at this time of the year.
“We got this Phase One deal with China and now what? Are they really going to purchase from us or is this going to be a fight? Are we going to fight with Brazil as far as how cheap we can be?” he questioned, stating his belief that CBOT soybeans are already too cheap.
One factor that is beginning to loom over the markets is the spring weather and how it could affect planting. Georgy said it’s still on the early side to determine how planting will be affected in the Northern Plains. However, he said seeding in Texas “has been a slow go.”