This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
We ended last week in the dumps, started this week with a great deal of optimism, which then faded through the week. This volatility is mostly due to money flow. There was a great deal of disappointment with Trump’s China trip last week. Then optimism this week on the U.S. readouts of what China had agreed to, though they were pretty vague and opaque. As this week wore on, there was no confirmation from the Chinese side and no more details from the U.S. side, the market lost some of its optimism. In addition, there are increasing headlines that the U.S. and Iran are getting closer to a possible deal. Yes, I know how many times we have said that now. Crude fell on Thursday and put pressure on grains as money flow was out of commodities.
The market rebounded Monday after the White House said that China agreed to purchase an additional $17 billion in U.S. ag products. That is in addition to the 25 million metric tons of soybeans they are supposed to buy. That is about the extent of the details we got from the White House on these ag purchases, and there was absolutely no confirmation from the Chinese side. But now keep in mind there was also no confirmation by the Chinese after the October meeting between Trump and Xi, yet the Chinese ended up buying the amount of old-crop beans the U.S. said they would. So, the market is going to give a little latitude, but we still do not know what commodities, what the terms are, and more importantly what the enforcement mechanisms are. To put it in some historical perspective, if you use $12 a bushel, the value of 25 million metric tons of soybeans would be around $11 billion. So, you get a total of $28 billion in total ag exports to China. The U.S. has said that 2026 will be prorated, so it will be more like $22 billion this year. Taking out trade-deal negotiations and big new tariffs, $22 billion to $28 billion puts it right at the historical average. A new record value of U.S. ag exports to China was set in 2021 when it hit $32 billion, and it was broken the next year, hitting $38 billion. So, the big grand bargain with China so far just gets us back to where we have been historically. And that is if they honor those pledges. As long as something else positive has been gained in other aspects of our relationship with China, we should be happy getting back to status quo on ag trade. But I do not see anything else gained on other fronts. Not yet anyway, maybe it’s coming.
Exports on corn this week were well above expectations and very impressive for both old crop and new crop. We continue to run well ahead of the pace needed to reach USDA’s estimate, which will force them to raise it sometime. However, they have a buffer in the feed demand to keep from taking too much off of carryout. Actually, we need these exports to keep the carryout from going higher. Ethanol production rebounded this week more than expected but has now fallen behind the pace needed to reach USDA’s estimate. Soybean exports were not impressive, but there were some old-crop and new-crop sales to unknown. The chatter is that hopefully China is starting to buy after the meeting. They are behind their historical normal pace for new-crop bean purchases.
The markets will be closed Monday for Memorial Day. We expect widespread rains across the whole Southeast for much of the weekend. I suspect anyone with spring crops in the field right now will be happy to have their outdoor plans ruined by rain this weekend. I am praying for inches of rain falling slow all weekend. Have a great Memorial Day!