Points to ponder

The trade war has escalated, and now US beans have gone under South American bean prices as of last Thursday. Brazilian beans paced the decline in June, but as the Brazilian currency firmed last week, on Thursday, their beans went above our price when you consider FOB. US beans are now some $0.40 below SA prices, and last time this happened in April, we saw a flurry of buying activity from other buyers around the world outside of the Orient.

What’s interesting about US prices going discount, is that even if you wanted to buy Brazilian beans right now, you couldn’t do it. This makes US prices even all that more advantageous, and we are likely to see some big business as we walk into the rest the week. This following story was released yesterday by Reuters.

Brazil's soy trading has practically ground to a halt as uncertainty over freight costs has kept buyers and sellers at bay despite expectations of stronger sales after an escalation of the U.S.-China trade fight, brokers and farmers said on Monday. Doubts about the price of shipping soy by truck in Brazil, now subject to government-imposed minimum prices after a nationwide trucker strike in May, have stalled grain trading and shipments, said Antonio Galvan, president of Mato Grosso grain grower’s association Aprosoja. (Reuters)

Add to that corn in this freefall has seen the spot contract drop into the 340 range. Remember last fall for four months, during the worst of the corn fundamentals, the mid-340 range essentially held spot corn. Look for July corn to arrest its current decline in the 342-348 range. Nobody said the trade war would be easy on us while it’s hard on the Chinese. In order to make change, there would be some pain, We were losing the Chinese as buyers of our Ag products, just look at what the trend has been over the last decade. We need to reverse that trend if agriculture is going to grow. You can brag all you want about the beans we sold to China and how it was every third row of beans. The growth of Chinese buying continued to go to South America more than the US.

We are hedged on our new crop beans and will advise anyone holding still the July short-dated puts by Thursday what to roll to. Otherwise, we have the August short dated on for beans and are 50% hedged off near the best levels of the year on corn and wheat.