Soybeans into truck

As markets absorb weekend rains and look for any news to come out on coronavirus, the election in November now looms as an influencing factor.

As President Donald Trump and likely Democratic nominee Joe Biden prepare for a November battle at the polls, Global Commodity Analytics president Mike Zuzolo wrote that China will play a major role in determining the outcome of that contest.

“If President Trump presses China’s leadership into increased trade hostility this soon before the November election, it is better than 50/50 odds in my view that it could cost him a second term in his presidency,” Zuzolo said in his weekly commodity brief for May 17.

He noted that the U.S. is continuing to reassure the market that China is working to meet their end of the phase one trade agreement. The heightened tensions between the two countries due to coronavirus makes the global economy appear more vulnerable than it already is.

He said while many voters will be unhappy about China’s handling of the outbreak, it may not be enough to alter their vote if the U.S. economy is struggling in the meantime.

“But they are much more concerned about feeding their families,” Zuzolo said. “Those of us who are still blessed to be able to afford groceries are not too happy to be paying so much more than we should be paying.”

Zuzolo also took the time to look at how new-crop basis levels will impact the upcoming season. He noted that the cash basis is acting differently than last year, not giving many opportunities at the moment due to the hit to demand coronavirus created.

He believes the worst of the hit should be behind the markets now, however, and brighter days should be ahead.

“This negative demand hit should now be behind us if we can come out of COVID-19 economically,” Zuzolo said. “This was a key feature to the USDA report, as it too suggested improved ethanol and livestock feed demand as we worked through Q2 and Q3. This also matches up with my perception and analysis of the most sensitive downside potential in prices between now and the election.”