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July 14, 2020 | FBN Insights | Kevin McNew

Phase 2 Trade Deal No Longer on Agenda

Trump says relationship with China has been severely damaged by actions around coronavirus epidemic

Phase 2 Trade Deal No Longer on Agenda

  • President Trump told reporters that he is not thinking about a Phase 2 trade deal with China.
  • The President also said that the relationship with China has been severely damaged by actions around the coronavirus epidemic.
  • In May, he was “very torn” about whether to end the Phase 1 deal in retaliation, or keep it in place.
  • At the time, White House trade advisor Navarro was forced to walk back comments that the Phase 1 deal was “over.” 
  • Treasury Secretary Mnuchin and US economic advisor Kudlow have defended the deal, and assured the public it would remain in place.
  • The President’s Phase 2 comments appear to offset optimism following China’s largest purchase of US corn in over 25 years. 

FBN’s Take On What It Means: Deteriorating relations between the U.S. and China increase skepticism about China meeting its obligations in the Phase 1 trade and have apparently derailed further negotiations for Phase 2.  However, China will likely continue buying US agricultural commodities as it needs to and/or when prices are favorable. They are expected to increase purchases of new crop soybeans as supplies in South America are diminished until the next harvest and US prices are the most competitive in the world into January. 

 

Weekly Crop Progress Comments 

  • Corn conditions slipped for the week, but the crop remains rated above last year with an overall favorable forecast for the near term.
  • Silking was reported for all states with the US crop at 29% silking and 3% doughing.  Silking is near the average at 32%.
  • Soybean conditions also dropped for the week with 68% rated good to excellent, a decline of three points.
  • The crop is 48% blooming, which is ahead of the 40% average and 11% is setting pods versus the 10% average.
  • Cotton conditions were mixed with a point higher in good to excellent but three points higher in the poor category.
  • Winter wheat harvest is 68% complete, which is near the average but well ahead of last year’s pace at 54%.
  • Spring wheat conditions fell with 80% of the crop heading.

FBN’s Take On What It Means: The decline in conditions across the board may offer minor support in the short term but with an overall favorable weather forecast for the coming week, prices are not expected to rally.  FBN’s latest yield forecast model for corn pointed to a lower forecast than before but at 178.4 bushels per acre, it still would be a record.  The longer-term weather forecast calls for heat into the second half of July, but the confidence in that forecast is limited. 

 

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