Last week, China purchased United States soybeans.
AUDIO: Under Secretary for Trade and Foreign Agricultural Affairs Ted McKinney
AUDIO: Brian Grossman, Zaner Ag Hedge
Zaner Ag Hedge market strategist Brian Grossman says “the (soybean) market was disappointed” by the two sales announcements, totaling 1.4 million metric tonnes. He discusses the factors giving the market a bearish approach to relatively good news.
“We are allocating, based off our estimates, roughly 10 million metric tonnes of the USDA’s forecasted 1.9 billion bushels to go to China,” Grossman said. “Picking up under two million metric tonnes is a step in the right direction. But, (it’s) nowhere near what we need to see in order to keep our balance sheet on pace with what USDA is currently forecasting.”
A United States trade official remains “cautiously optimistic” about future trade relations with China. However, Under Secretary for Trade and Foreign Agricultural Affairs Ted McKinney admits it all depends on whether or not the Asian nation wants to address issues at hand.
“We’re pleased that we’ve seen a couple baby steps, with the purchase of soybeans. Before, we were pleased with the outcome between President Xi Jinping and Trump in Buenos Aires. We’re in the wait and see now,” Under Secretary McKinney said. “We’ll see if China wants to address this enormous deficit or play by the rules under the WTO and not steal our stuff.”
The next few weeks will hopefully provide a clearer picture. Grossman provides “the lay of the land” for this week’s trade.
“We are heading into the holiday trade, so a little bit of holiday doldrums going on,” Grossman said. “We have export sales coming in on Thursdays and as always, we are going to be very sensitive to any kind of headlines in regard to what is happening with China. (A) couple flash sales in soybeans could go an awful long way.”
Under Secretary McKinney thanks America’s farmers and ranchers for their patience during this season of waiting. He believes the United States is on the continuum of “short-term pain, long-term gain,” and hopes to see additional progress in the coming days.
“It’s too early to say, but the signs – now they change every other day – are more promising. The reality is if China wants to address the deficit, quit stealing our intellectual property and forcing tech transfers, they can do that. The proof is in the pudding and that’s what’s bringing all of the uncertainty. But one step leads to another, so let’s celebrate the last two days and see how the next ones come,” McKinney said.
Ultimately, the United States “needs to see massive volume coming out of China.” Grossman also emphasizes the need for China to take delivery on its purchases.
“Everything we’ve talked about is beans they have boughten, with very little being delivered. If we start seeing those deliveries pick up through the week, that is going to be encouraging. The market isn’t going to be fooled by a sale versus delivery. We know we need to see those deliveries,” Grossman said.