WINNIPEG, (MarketsFarm) – There is no doubt that commodities on the Chicago Board of Trade have struggled since the coronavirus outbreak in China, but the situation could be worse said a trader.
“I personally think the markets … are holding up pretty well with all of the negative news,” commented Scott Capinegro of Barrington Commodities in Barrington, Ill.
He said some progress was made in U.S./China trade as the Phase One trade deal officially came into effect on Feb. 15. Then three days later, China announced tariff exemptions for almost 700 U.S. imports that included soybeans, corn and wheat. China said it will begin accepting applications for one-year exemptions beginning Mar. 2.
“It’s good, positive news coming out of China that they’re not going to sit on their hands,” Capinegro said, but noted China recently purchased corn from Ukraine and continues to buy soybeans from Brazil.
He stressed that China has yet to begin their massive purchases of U.S. agricultural products as outlined in Phase One, but the tariff exemptions were a good step. He said the coronavirus certainly “screwed things up.”
“They’re trying to show their commitment to the Phase One deal, but yet they haven’t stepped in to buying as much as people thought they would be already. But it’s early yet,” Capinegro commented.
The U.S. is facing the additional dilemma of the Brazil real hitting new lows as the dollar gains strength.
“That always makes Brazil’s products look cheaper,” the trader stated.
Domestically, record amounts with the soybean crush have put pressure on soyoil. Capinegro said for soyoil to turn around, it needs to see gains in soymeal.
Despite all of these issues, he noted the corn basis has remained firm and the soybean basis is regaining strength.
“There is something underneath this market that’s happening,” Capinegro said.
Until then, the U.S. Department of Agriculture releases its crop outlook on Feb. 20 and 21, which he believes will put pressure on the markets. Also, options for the March contract expire on Friday.