Eighteen months ago, if you had asked any farmer, broker or buyer of grains and oilseeds what soybean prices would do on the day of a signed trade agreement between the U.S. and China (where the latter agreed to increase buys of farm products in a huge way), one could predict "up limit" as the answer with near certainty. Ask the same question a year ago, or even six months ago, and the answer is the same. But soybean prices were down over a dime on Jan. 15 as President Donald Trump and top Chinese officials met in Washington to sign the first phase of the agreement.
But why were prices lower? Details of the report had been discussed over the last few months and China is supposed to boost agricultural product purchases to $40 billion to $50 billion in 2020 and 2021 (each year).
The reason comes down to the mounting expectation since October that China will put first its domestic growing industry and consider pricing over the language of any trade agreement. So at the ceremony when Chinese Vice Premier Liu He said that Chinese firms will buy American products "based on market conditions," that expectation was confirmed. There is no solid commitment to double agricultural product imports if pricing can throw off the demand. China gave itself an out with that comment. And though Trump can use this signing as a win as he starts his 2020 election year, the fact that the market is lower highlights the fact that no one in the market is betting on a major demand shift back to China.
Wheat markets remain firm, with support continuing for Kansas City and Chicago futures as well as the spring wheat market. Domestically, stocks are still quite comfortable. The U.S. Department of Agriculture did cut carryout stocks in last week's supply and demand estimates, but not considerably. Global stocks were also little changed. The support domestically was focused on the winter wheat seedings data that showed the lowest planted area for winter wheat in the U.S. since 1909. That, along with not great conditions going into dormancy, has kept the market supported to a degree. The bigger support for wheat has come from abroad. Demand for French wheat has been very strong. Russia may consider capping grain exports from January to June at 20 million metric tons. Though this move by Russia likely would not impact their actual sales in any significant way, as most of its exports are done from July to December. Australia remains a mess, as well. All of these factors have lent support to wheat markets of late.
Despite some strength in the broader wheat market, durum prices have been steady. There has been little excitement to get prices going, and the market is content to trade just above the lows.
The USDA took down domestic barley stocks in its January supply and demand estimates report. No changes were made on the production side, but shift in demand resulted in stocks falling to 89 million bushels from the December report's 92 million bushel carryout. The changes came from rising feed and seed demand, though there was a modest cut to food usage.
Mustard seed markets have remained firm despite little trade activity. The U.S. production data for the 2019-20 crop year showed a dip in output to 28,800 metric tons from last year's 33,300 total. Overall supplies dropped roughly 7,700 metric tons. Available stocks in the U.S. and Canada combined are down roughly 10% from a year ago.