WINNIPEG – As high-level trade talks are underway in Beijing this week between the United States and China, the commodity markets are watching carefully to see what happens, said an analyst following the Chicago Board of Trade.
“All eyes are on March 1,” said Steve Georgy of Allendale Inc.
Should negotiators fail to make any progress towards resolving the U.S./China trade war, the U.S. is set to hike tariffs on Chinese imports from 10 percent to 25 percent on March 1
Until then, any tidbit of positive news from the trade talks has pushed the markets up a little and any negative news has pushed it back down, said Georgy.
One good news story that helped the markets this week, he mentioned, was U.S. lawmakers came to a bipartisan agreement to avoid another shutdown of the federal government. Days ahead of their Feb. 15 deadline, Democrats and Republicans agreed to partially funding a wall along the U.S./Mexican border at an amount far less than the US$5.7 billion President Donald Trump has been demanding.
“That hope and optimism that this is going to be OK, that we’re going to get through this weekend without a shutdown helps support stocks,” Georgy commented, noting the positive effect on commodities wasn’t quite as strong.
Meanwhile the South American harvest and its second growing season have been having a neutral effect on commodities in the U.S., he said.
“It’s their weather right now that’s really being focused on, especially for their corn and beans. They’re in this growing period right now where they’re getting moisture in Brazil where it’s needed. They need to see less rain in Argentina,” Georgy explained.
Another neutral effect on commodities was the World Agriculture Supply and Demand Estimates from the U.S. Department of Agriculture. Although data hit all expectations there was little change on the markets Georgy said.
But there was almost a major spark in the commodities markets as the USDA lowered its yield projections for corn, he added. However, the lack of ethanol exports doused any such reaction.
The USDA also lowered its projections for the amount of soybean acres farmers are expected to plant in 2019, but Georgy said that could change.
“If we get a rally in bean prices, we could get more bean acres than what we think,” he stated.
Otherwise U.S. farmers are expected to boost their corn acres.