MarketsFarm — The current relationship between the United States and China has continued to be rather chaotic, according to Steve Georgy, president of Allendale Inc. at Fort McHenry, Ill.
Despite the two countries’ diplomatic row, China has sharply picked up its purchases of U.S. soybeans.
Georgy pointed to the 715,000 tonnes purchased by China on Wednesday — plus the 211,300 tonnes said to be for unknown destinations, but with China being the likely the buyer. These are in addition to the several hundred thousand tonnes purchased by China over the last week, which buoyed soybean prices at the Chicago Board of Trade (CBOT).
However, he was pessimistic about China being able to fulfill its obligations under the Phase One trade agreement to acquire US$40 billion in U.S. agricultural goods in 2020. Despite China’s recent flurry of purchases, the markets widely believe the country remains well back of meeting its target amount.
“What we’re seeing is we’re getting good purchases,” Georgy said. “It’s better than what it’s been, but we also have to remember that beans out of the U.S. are now cheaper than beans out of South America.”
In the latest tit-for-tat row between the U.S. and China, the U.S. State Department ordered China to close its consulate in Houston, Texas. The reason was said to be human rights violations, but reports on Wednesday stated the consulate was allegedly used for espionage purposes.
In turn, China countered with ordering the U.S. to shutter its consulate in Wuhan, the city in which the first reported cases of COVID-19 emerged.
“This kind of shows the uncertainty in our governments. We expect things are getting better, but showing that things might be getting worse,” Georgy said, citing concern that the U.S./China spat “could escalate rather quickly.”
The situation really has yet to spill over into CBOT in any strong fashion, he noted.
With the U.S. Department of Agriculture (USDA) preparing to issue its next monthly supply and demand report on Aug. 12, Georgy suggested the department could be in something of a bind when it comes to corn yields.
Recent precipitation across the U.S. Corn Belt has boosted crop development, with markets believing previous yield estimates will still come to fruition rather than decline. USDA pegged corn yields for 2020 at 178.5 bushels per acre.
“It’s going to be tough for the USDA to change anything for corn,” he said.
— Glen Hallick reports for MarketsFarm from Winnipeg.