Global developments will likely continue to drive grain prices over the next week, with questions remaining about the U.S.-China trade deal, the Russia-Ukraine war and South American weather keeping traders busy.
Doug McKalip, USDA’s chief ag trade negotiator, said he wants China to strive to meet its trade deal promises, but is also pushing to diversify exports beyond China.
“I think for the American farmer, it’s important to have a diverse set of buyers out there,” McKalip was quoted as saying in a Reuters story. “We need to develop additional markets.”
Census data last week showed that China actually imported a record amount of U.S. ag and related products last year – nearly $41 billion, which was up 14% from the prior record in 2021, but that number is skewed, according to Joe Vaclavik of Standard Grain.
“As it relates to those original trade deal targets, 2022 would have been the first year that the target was actually met,” he said. “But data indicates that China filled only 77% of the ag purchase targets in 2020 and 2021 combined. So the reason China was able to hit the target last year was because of high commodity prices, in all likelihood, given that this deal was benchmarked at dollars, not in amounts or quantities.”
Grain production and exports out of the Black Sea region remain in question.
“With increased Russian missile strikes, Moldova’s government collapsing and more NATO airspace questions, funds decided they needed a bit more coverage if things in the Black Sea do start to ramp up,” said Jacob Christy of The Andersons. The world still has a heavy reliance on Black Sea exports, and with both Russia and Ukraine set for a spring offensive, that humanitarian corridor is being called into question, he said.
Meanwhile, the USDA said on Feb. 10 that the U.S. ag sector posted its best export year ever in 2022, with international sales of farm and food products totaling $196 billion. Agriculture Secretary Tom Vilsack said the exports increased 11%, or $19.5 billion, from the previous record set in 2021.
The wheat market is tight, according to Craig Turner of StoneX.
“The weather outlook for North America is improving,” he said. “As oilseeds and corn break, wheat is still tight for another year only because Ukraine impacts the wheat market more than corn and soybeans.”
