Analysis Grains
Will China make its move in soy before Trump is inaugurated?
Markets do not like uncertainty, it is said. That was confirmed yesterday. Volatile, that's what we can rightly call the past trading day. What Trump is exactly going to do and what influence that has on the agricultural markets is difficult for traders and analysts to estimate. Various theories are circulating.
The December contract for wheat on the Matif closed €2.50 higher at €216.50 per ton yesterday. On the CBoT, the grains eventually made up for the earlier loss on the trading day. The increase in wheat and soy was limited to ¾ cent. This brought the closing price of wheat to $5.73¼ per bushel and soy closed at $9.94½ per bushel. Corn took a bigger step and closed 1.9% higher at $4.26¼ per bushel.
The outcome of the elections in the US dominated the news in the grain market. Will Trump start a trade war with China once he is in the White House, and if so, what countermeasures will Beijing then take? Players in the financial markets also do not know. Friends and foes agree that China has its eye on agricultural commodities.
Trump will be inaugurated on January 20. Some analysts speculate that China might use the period between the elections and the inauguration to make another purchase round in the US. Another theory that is being discussed is that China could use agricultural products from the US to reduce the trade surplus with the US by importing more from the country, in order to avert a trade war. Although China is better prepared than eight years ago when Trump first became president, Beijing is eager to come to an agreement with the US at the negotiating table.
Speculation
The rise in grains during the last trading session is mainly driven by speculation, according to various analysts. Import duties and tax cuts as Trump plans to introduce are usually drivers of inflation. Taking a position in commodities is a tool for investors to hedge against inflation.
Trading is already taking a bit of a stance in anticipation of the Wasde report coming out this Friday evening Dutch time. It is remarkable that corn is making a leap. The US corn harvest is relatively large due to good yields.
Russia's export pace not sustainable
SovEcon released new figures on the Russian wheat stock yesterday. The market agency estimates the wheat stock on October 1 at 38.7 million tons. This stock is 17% smaller than last season on this date, mainly due to a smaller harvest and large exports. According to SovEcon, Russia exported 15 million tons of wheat from July to September. The current export pace is not sustainable for the rest of the season, SovEcon writes.
