U.S.-China trade negotiations have reportedly hit a roadblock, with no new talks scheduled until September, and now the threat of additional tariffs from U.S. President Donald Trump has increased tensions between the two countries. Grain prices reacted accordingly.
All this is occurring after farmers planted into delayed and wet conditions and are now dealing with excessive dryness in certain areas of the Midwest.
“This is going south,” said William Moore of The Price Futures Group. “The Trump tweets (on tariffs) and the whole (trade) deal — the whole thing is really disintegrating. We are going to do 10% more tariffs and they are going to retaliate, but at the same time it’s extremely dry in the eastern Corn Belt.”
That dry weather should be helping prices from a fundamental perspective, but the lack of a trade deal is counteracting those possible gains, Moore said.
He noted that grains, especially corn, are sitting in an oversold condition, so things may be turning up for the market.
“I don’t think it’s a place to get bearish in this market,” Moore said. “There’s too much water to go over the dam before we see what kind of crop we have. It may take until harvest to see how tough this crop got hurt by the late planting.”
The next indication of how much the wet spring affected farmers will come on Aug. 12, when the USDA releases updated numbers for acreage. The initial survey at the end of June shocked farmers and traders alike, with corn showing much higher projected acres than anticipated and soybeans falling below expectations.
With the updated numbers coming, this may give a good idea where the market will go for the next few months in the absence of a trade deal.
“How do you get more acres out of corn, when we supposedly had the worst start ever?” Moore asked. “They will correct that number. Nobody’s perfect, right? It’s going to stabilize the market. They won’t do it all in this report, but a lot of years it’s harvest before we know what we’ve got. It’s going to be late this year too because everything’s a month behind.”