Markets Tread Water as Seasonal Pressure Continues
U.S., China to meet on trade; France's crop woes continue
U.S./China to Meet on Trade
- Senior U.S. and Chinese officials will review the implementation of the Phase 1 trade deal August 15.
- Under the Phase 1 trade deal, China had committed to increase purchases of US products by $200 billion over 2017 levels.
- China remains behind the pace needed to meet its first-year goal of a $77 billion increase.
- Imports of agricultural goods have been lower than the 2017 level, far behind the 50% increase needed to meet the 2020 target of $36.5 billion.
FBN’s Take On What It Means: The six month periodic review was part of the initial deal and it will be important to see whether the coronavirus slowdown will be used as a reason to amend the obligation. It is also possible the two sides will discuss other issues beyond the Phase 1 trade deal implementation as political tensions have increased since January. China has picked up their purchases of farm products recently and there is some indication they may increase further as a goodwill gesture, but the uncertainty is not good for the markets.
France’s Crop Woes Continue
- France's Agricultural Ministry lowered its forecast of the 2020 soft wheat harvest to 29.71 million tonnes.
- This projection is down 1.6 million tonnes from its initial forecast last month and now 25% below last year's crop.
- The barley crop forecast was also lowered to 11.3 million tonnes from 12.3 million previously and 13.7 million last year.
- The first estimate of this year’s corn crop was 14.4 million tonnes, an increase from last year’s 13.0 million.
- The forecast for rapeseed crop was down slightly to 3.3 million tonnes from 3.4 million last month and last year’s 3.5 million.
FBN’s Take On What It Means: It definitely has not been a good year for French agriculture as the country has experienced drought conditions through much of the season. The ministry’s wheat forecast indicates there may be less wheat available for export. However, the US suffers from a freight cost disadvantage to traditional French destinations, and it will become the market’s job to price US supplies more competitively.
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