The cautious optimism we have been feeling regarding reaching a trade deal with China may be in critical condition over the next few days. The rumors have been that we have been on the cusp of getting this trade war to a conclusion. An American trade delegation was in China last week. The Chinese were reportedly sending a delegation back to Washington this week. The hopes were a new agreement would be signed in the next month or so.
Then on Sunday morning?s twitter feed, we saw the following: 
The exasperated comments reached a fever pitch by Sunday evening. Opinions and theories have been flying about. Could the President just be keeping pressure on the Chinese to finish the deal? Are the Chinese asking for more than what the United States should consider reasonable? The speculations go on and on.
Audio: World of Agriculture
However, one thing which cannot fall into the realm of speculation is how the markets are reacting to this news. Sunday night?s overnight trade was the first look we had on how Chicago was going to react to this news. The trade always moves on rumors and news, and Sunday?s overnight trade was no exception.
The grain trades are not the only ones reacting. The Dow, Nasdaq, and S&P 500 were also in a state of panic on Monday morning.
If the reaction of the markets wasn?t enough to make some people nervous, maybe the reaction of the Chinese will. In response to the latest tweets by President Trump, Chinese Vice Premier Liu He may rethink his trip to Washington to continue talks. China?s Global Times editor Hu Xijin responded saying he thinks a trip would be unlikely.
A few hours later Xijin softened his tone. He stated there was still a chance the delegation may come to Washington, and that it should be seen as a gesture of goodwill from the Chinese to see the talks through.
We have been playing flip flop on the future of a Chinese trade deal for some time now. The effect on the soybean markets has been real. On June 1st, 2018, many markets were still trading over $10 per bushel. Now on May 6th, the CBOT will open the markets at just over $8 per bushel. There is still fear we could 7?s in front of those numbers very soon. What is more, a trade deal with China may result in a slight rebound, but there is no guarantee the Chinese will return as buyers. South America is holding all the cards right now in the export market.
The hog markets made their first reaction to the news on Monday morning. The futures trades were quickly seeing triple-digit losses to limit down on negative trade news. Pork is the other industry which has faced severe negative impacts from the Chinese trade dispute. The only saving grace for the pork industry has been the devastation which African Swine Fever has brought to the Chinese in terms of pork production. The Chinese have had to relent and make pork purchases despite the over 60% tariffs on the U.S. imports.
It is hard to say what a total dissolving of Chinese trade negotiations could mean for the U.S. Ag economy. With uncertain futures for the passage of USMCA, negotiations with Japan, and the European Union?s total resistance to talking about agriculture in trade talks, this could be just another straw fluttering towards the camel?s back.
