Precipitation has halted many farmers in the Midwest, leaving planting season relatively quiet for the time being.
While the wet soils and weather were not affecting the grain markets dramatically a couple of weeks ago, that could change soon, said Mike Zuzolo of Global Commodity Analytics.
“Trade is acknowledging now that we are getting ready to turn the corner to May that we are probably going to be at the slowest pace of corn planting since 2013, about 8 points below the 5-year average,” he said. “That is the piece of the fundamental puzzle that … is likely to keep support in the prices.”
While there is support from the slow plantings, Zuzolo said the main opposing force limiting the upside is the lack of a U.S./China trade deal. With no positive news coming out in the past few weeks, the market has grown pessimistic a resolution is close at hand.
“I think that’s something I would say is a new feature over the last three weeks,” Zuzolo said. “I think trade was excited and optimistic about the potential for a trade deal until after the acreage and stocks report at the end of March. They really had their sights set on (a trade deal) being hammered out before those numbers came out.”
He said concerns a trade deal could be pushed back to June “let the air out of the balloon.”
No deal combined with African swine fever and South American bean harvest coming on strong could make it tough for soybeans to find support.
In other trade news, the United States-Mexico-Canada Agreement has yet to be ratified by Congress. Zuzolo said that may be on hold until a China deal is reached.
“The market will assume once a trade deal with China is done, the rest will follow,” he said. “… I think China has to be the first domino to fall for the rest to come on and move.”
He called the USMCA a “political football” for the upcoming election, saying he thinks if a trade deal is completed with China, President Donald Trump can start applying additional pressure to Congress. However, Zuzolo said Trump has no leverage with Congress until he can bring home a China trade deal.