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February 07, 2020 | FBN Insights | Kevin McNew

Markets Seek Trade Deal Clarity

USDA’s February WASDE will be released on Feb. 11

Markets Seek Trade Deal Clarity Ahead of Next Week’s USDA WASDE Report

The USDA’s February WASDE report forecast will not include Phase 1 trade details about China's purchase commitments from the deal signed on Jan. 15.  

USDA analysts have not been told buying targets for each farm product included in the trade deal. 

The trade deal called for China to increase its purchases of U.S. agricultural commodities by $40 billion over the next two years.

Soybean export sales from the United States have remained sluggish since the deal was signed.

Chinese demand for U.S. exports typically slows this time of year as the South American harvest begins.

The USDA’s February WASDE will be released on Feb. 11 at 11 a.m. CST   

FBN’s Take On What It Means: We believe that the path to China’s goal of increased US agricultural commodity purchases is long and involves other commodities aside of soybeans and corn.  We would not be surprised to see the USDA account for some incremental Phase-1 driven export demand for soybeans, wheat and possibly corn in the February WASDE.    

       

China Cuts Tariffs on $75 Billion of US Goods  

On Thursday, China said it would halve additional tariffs levied against 1,717 U.S. goods last year, following the signing of a Phase 1 deal.

China's finance ministry said that starting on Feb. 14, additional tariffs levied on some goods will be cut to 5% from 10% and others lowered to 2.5% from 5%.

The products affected by the new rule are among $75 billion of goods hit by Chinese tariffs of 5% to 10% tariffs that came into effect on Sept. 1.

Some of these items include pork, beef, soybeans and whiskey.

China’s decision follows Washington's move to reduce the tariff from 15% to 7.5% on $120 billion worth of Chinese goods starting Feb.14.

FBN’s Take On What It Means:  While it remains to be seen how China achieves the negotiated dollar targets of agricultural commodities, we believe that reduced tariffs on US soybeans, poultry and beef can be beneficial for both cash and futures prices.                                             

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

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