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Trade, Tariffs and Crop Market Outlook

Frayne Olson, PhDCrop Economist/Marketing Specialist

Director – Burdick Center for Cooperativesfrayne.olson@ndsu.edu 701-231-7377 (o) 701-715-3673 (c)

NDSU Extension ServiceND Agricultural Experiment Station

Dept. of Agribusiness & Applied Economics

News from G20 Summit• The agreement sets a 90-day deadline for

the two countries to create some agreement on how to handle key differences on forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture.

• The 90-day deadline started on Saturday, December 1, 2018 and ends March 1, 2019, but could be extended.

Bloomberg News – 12/02/18

Current Negotiations• USTR Robert Lighthizer and US Treasury

Secretary Steven Mnuchin will travel to Beijing this week for trade talks on Thursday and Friday, Feb. 14 - 15, 2019

• Deputy level meetings began on Monday, Feb. 11, 2019

• Agricultural and equity markets became concerned when it was announced that U.S. President Trump and Chinese President Xi Jinping would not meet in person before March 1, 2019, negotiating deadline.

Reuters News – 02/08/19

Current Negotiations• U.S. President Trump and Chinese

President Xi are expected to meet “sometime in March”, said USDA Deputy Secretary Stephen Censky.

• “It will ultimately take…President Trump and President Xi sitting down face-to-face figuring that out and getting a final deal because they are the only two that’ll ultimately be able to nail it down,” said White House Press Secretary Sarah Sanders

Reuters News – 02/13/19

Recent Negotiations• U.S. and Chinese officials completed two

days of high level trade negotiations on Jan. 30 - 31, 2019

• China has offered to purchase 5.0 mm. (183.7 mill. bu.) of soybeans as part of the trade talks.– Not necessarily one single purchase.– These purchases have begun.

Reuters News – 01/31/19

Recent Negotiations• U.S. Trade Representative Robert

Lighthizer said there was “substantial progress” on intellectual property and forced technology transfer issues.

• “At this point, it’s impossible for me to predict success. But we’re in a place that if things work out, it could happen”, said Lighthizer.

Reuters News – 01/31/19

Recent Negotiations• Mr. Lighthizer also said the U.S. objective

was to:– Make China’s commitments “more specific,

all-encompassing and enforceable”.– Include mechanisms for taking action if China

fails to follow through with agreement.• Enforcement mechanisms may include a snap-

back of U.S. tariffs.

• Lifting the current U.S. and Chinses tariffs was not part of the discussions.

Reuters News – 01/31/19

Recent Negotiations• U.S. Trade Representative’s (USTR) office

said China has pledged to purchase “a substantial amount” of agricultural products, energy and manufactured good and service for the U.S.– Goal is “achieve fairness, reciprocity and

balance in trade relations between our two countries.”

• Also discussed issues related to intellectual property protections.

Reuters News – 01/09/19

Key Questions• What other “agricultural products” will be

purchased and when?– Pork, beef, chicken, ethanol, DDGs, corn,

sorghum, cotton, spring wheat, rice (?) …• Pork purchases have occurred.• Ethanol has been shipped to SE Asia, blended with

local supplies and re-shipped to China.– China has said no more than 40% of the blend can

contain U.S. ethanol.

U.S. Spring Wheat Export Destinations

(1,000 Metric Ton)

2017 All Wheat Exports by Country – FAS Online

Country 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Philippines 1,071.1 1,165.4 1,161.3 1,138.5 1,657.3 1,247.6Japan 1,330.6 945.7 1,269.9 850.6 1,048.3 995.9Taiwan 588.3 581.1 621.4 593.0 568.0 626.0China 475.2 467.0 256.8 629.6 1,042.6 542.9South Korea 385.4 352.8 396.2 353.0 393.6 399.7Thailand 297.5 287.9 281.7 261.1 331.7 256.8

Recent News• Chinese officials are considering

purchasing between 3.0 mmt and 7.0 mmtof U.S. wheat.

• The final purchase volume will depend upon how trade talks go with the U.S.

• China may buy a small amount initially and increase purchases if talks go well.

Bloomberg News – 01/23/19

Other Trade Agreements

Comprehensive & Progressive Agreement for Trans-Pacific

Partnership(TPP Replacement)

• Trade agreement including:– Australia, New Zealand, Canada, Japan,

Mexico, Brunei, Chile, Malaysia, Peru, Singapore, Vietnam.

• Was signed on March 8, 2018.• Began Jan. 1, 2019 with a 9 year

transition.

CPTPP Wheat Tariff ReductionsDate

Japanese Wheat

Tariff Rate(Yen/Kg)

Tariff in USD/Bu

Tariff in USD/MT

Difference USD/Bu

Difference USD/MT

2018 17.0 4.21 154.55 0.00 0.00Jan 2019 16.2 4.01 147.27 0.20 7.27Apr 2019 15.3 3.79 139.09 0.42 15.45Apr 2020 14.5 3.59 131.82 0.62 22.73Apr 2021 13.6 3.36 123.64 0.84 30.91Apr 2022 12.8 3.17 116.36 1.04 38.18Apr 2023 11.9 2.94 108.18 1.26 46.36Apr 2024 11.1 2.75 100.91 1.46 53.64Apr 2025 10.2 2.52 92.73 1.68 61.82Apr 2026 9.4 2.33 85.45 1.88 69.09

Assumes 110 Japanese Yen = 1.00 U.S. Dollar

Other Trade Agreements• U.S – Japan Free Trade Agreement.

– Negotiations have just begun.• U.S., Mexico and Canada Agreement

(USMCA).– NAFTA replacement.– U.S. Congress, Mexican Congress and Canadian

Parliament must ratify the agreement.• U.S. – Korea Free Trade Agreement

(KORUS)– Originally passed in 2012, but refinements to auto

tariffs are currently being negotiated.

Other Trade Agreements• Comprehensive Economic and Trade

Agreement (CETA).– Canada – EU agreement expected to be signed

soon.• U.S. and EU have just begun negotiations.

– Steal (25%) and Aluminum (10%) tariffs are still in place.

• Agriculture will not be part of these negotiations• Meeting scheduled for 01-07-19 between

U.S. – EU – Japan to discuss state-owned firms, forced technology transfer and China.

• Brexit?

Current Negotiations• China has offered to increase annual goods

imports from the U.S. by a total of $1 trillion over the next six years ($1,000,000,000,000).

• One source said the offer implies an increase in total annual Chinese imports from $155 billion to approximately $200 billion in 2019 and $600 billion in total imports by 2024.

• Economists argue it would be difficult to totally eliminate the trade gap due to large U.S. demand for Chinese products.

Bloomberg News – 01/18/19

Chinese Soybean Purchases• December 13, 2018 – 1.13 mmt• December 14, 2018 – 0.30 mmt• December 18, 2018 – 1.20 mmt• December 20, 2018 – 0.204 mmt• January 7, 2019 – 0.18 to 0.90 mmt.• February 1, 2019 – 1.00 mmt.• February 4, 2019 – 0.612 mmt.• February 5, 2019 – 2.603 mmt.• February 6, 2019 – 0.523 mmt.• Total of 7.75 to 8.47 mmt vs. 23.81 mmt this

time last year (Sep. 1 – Feb. 8)

Weekly U.S. Soybean Exports(09/01/2013 – 12/27/2018)

USDA-FSA Weekly Export Sales Report

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March CBOT Soybean Futures

DTN Prophet X – 02-13-19 pm

March CBOT Corn Futures

DTN Prophet X – 02-13-19 pm

March MGEX Spring Wheat Futures

DTN Prophet X – 02-13-19 pm

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U.S. Soybean – Total Prod. & Use(Billion Bushels)

Feb. 8, 2019 WASDE Report & Oil Yearbook Table 3

U.S. Soybean Supply & Demand TableU.S. Soybean 2017/2018 (est.) 2018/2019 (Feb.) 2019/2020 (Prelim)

Planted A. 90.2 Mill. A. 89.2 Mill. A. 82.5 Mill. A.Harvested A. 89.5 Mill. A. 88.1 Mill. A. 81.8 Mill. A.Yield/Harvest A. 49.3 bu. 51.6 bu. 50.0 bu.Beginning Stocks 302 Mill. Bu. 438 Mill. Bu. 885 Mill. Bu.Production 4,412 Mill. Bu. 4,544 Mill. Bu. 4,090 Mill. Bu.Imports 22 Mill. Bu. 20 Mill. Bu. 25 Mill. Bu.

Total Supply 4,735 Mill. Bu. 5,002 Mill. Bu. 5,000 Mill. Bu.Crushings 2,055 Mill. Bu. 2,090 Mill. Bu. 2,075 Mill. Bu.Exports 2,129 Mill. Bu. 1,875 Mill. Bu. 2,075 Mill. Bu.Seed 104 Mill. Bu. 96 Mill. Bu. 95 Mill. Bu.Residual 9 Mill. Bu. 31 Mill. Bu. 32 Mill. Bu.

Total Use 4,297 Mill. Bu. 4,092 Mill. Bu. 4,277 Mill. Bu.Ending Stocks 438 Mill. Bu. 910 Mill. Bu. 723 Mill. Bu.

USDA – WASDE – February 8, 2019

U.S. Corn – Total Production & Use(Billion Bushels)

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Feb. 8, 2019 WASDE Report & USDA – Feed Grains Data Base Table 4

U.S. Corn Supply & Demand TableU.S. Corn 2017/2018 (est.) 2018/2019 (Feb.) 2019/2020 (Prelim)

Planted A. 90.2 Mill. A. 89.1 Mill. A. 90.0 Mill. A.Harvested A. 82.7 Mill. A. 81.7 Mill. A. 84.6 Mill. A.Yield/Harvest A. 176.6 bu. 176.4 bu. 176.5 bu.Beginning Stocks 2,293 Mill. Bu. 2,140 Mill. Bu. 1,813 Mill. Bu.Production 14,609 Mill. Bu. 14,40 Mill. Bu. 14,930 Mill. Bu.Imports 36 Mill. Bu. 40 Mill. Bu. 50 Mill. Bu.

Total Supply 16,939 Mill. Bu. 16,600 Mill. Bu. 16,793 Mill. Bu.Feed & Residual 5,304 Mill. Bu. 5,375 Mill. Bu. 5,575 Mill. Bu.Food, Seed, Ind. 7,056 Mill. Bu. 7,040 Mill. Bu. 7,190 Mill. Bu.

Ethanol 5,605 Mill. Bu. 5,575 Mill. Bu. 5,700 Mill. Bu.

Exports 2,438 Mill. Bu. 2,450 Mill. Bu. 2,425 Mill. Bu.Total Use 14,799 Mill. Bu. 14,865 Mill. Bu. 15,190 Mill. Bu.

Ending Stocks 2,140 Mill. Bu. 1,735 Mill. Bu. 1,603 Mill. Bu.USDA – WASDE – February 8, 2019

U.S. All Wheat – Total Prod. & Use(Billion Bushels)

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Feb. 8, 2019 WASDE Report & Wheat Yearbook Table 6

U.S. All Wheat 2017/2018 (est.) 2018/2019 (Feb.) 2019/2020 (Prelim)

Planted A. 46.1 Mill. A. 47.8 Mill. A. 51.0 Mill. A.

Harvested A. 37.6 Mill. A. 39.6 Mill. A. 43.1 Mill. A.

Yield/Harvest A. 46.4 bu. 47.6 bu. 47.8 bu.

Begin Stocks 1,181 Mill. Bu. 1,099 Mill. Bu. 956 Mill. Bu.

Production 1,741 Mill. Bu. 1,884 Mill. Bu. 2,060 Mill. Bu.

Imports 157 Mill. Bu. 140 Mill. Bu. 130 Mill. Bu.

Total Supply 3,079 Mill. Bu. 3,123 Mill. Bu. 3,146 Mill. Bu.

Food 964 Mill. Bu. 970 Mill. Bu. 975 Mill. Bu.

Seed 63 Mill. Bu. 63 Mill. Bu. 68 Mill. Bu.

Feed & Residual 51 Mill. Bu. 80 Mill. Bu. 120 Mill. Bu.

Exports 901 Mill. Bu. 1,000 Mill. Bu. 1,050 Mill. Bu.

Total Use 1,980 Mill. Bu. 2,113 Mill. Bu. 2,213 Mill. Bu.

Ending Stocks 1,099 Mill. Bu. 1,010 Mill. Bu. 933 Mill. Bu.

U.S. All Wheat Supply & Demand Table

USDA – WASDE – February 8, 2019

Winter Wheat Seedings(Million Acres)

Total Winter

Hard Red Winter

Soft Red Winter

White Winter

Average trade estimate 32.128 22.579 5.963 3.488

Highest trade estimate 33.300 23.620 6.200 3.700

Lowest trade estimate 31.500 21.925 5.643 3.211

USDA final 2018 plantings 32.535 22.923 6.076 3.536

USDA 2019 Seedings 31.290 22.200 5.660 3.440

Reuters News – 02-04-19 & USDA Winter Wheat and Canola Seedings

U.S. Spring Wheat – Total Prod. & Use(Million Bushels)

Feb. 8, 2019 WASDE Report & Wheat Yearbook Table 6

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Private Forecasts for 2019 Acreage

• IEG Vantage (former Informa Economics)– Corn 91.50 mill. a. (89.14 mill. a. in 2018)

• Increase of 2.36 mill. a.– Soybeans 86.20 mill. a. (89.145 mill. a. in

2018)• Decrease of 2.945 mill. a.

– Wheat 47.16 mill. a. (47.80 mill. a. in 2018)• Decrease of 0.64 mill. a.• 22.2 mill. a. hard red w.w. (22.92 mill. a. in 2018)• 13.78 mill. a. spring wheat (12.69 mill. a. in 2018)• 1.87 mill. a. durum (2.07 mill. a. in 2018)

Current Brazilian Soybean Estimates

• 117.0 mmt - USDA February Estimate– 120.3 mmt – 2017/18 USDA est.

• 122.0 mmt – IEG Vantage (Informa)• 117.6 mmt – Agroconsult – BR cons.• 117.2 mmt – Celeres – BR cons.• 115.7 mmt – Safras & Mercado – BR cons.• 115.3 mmt – CONAB – BR ag. ministry• 113.0 mmt – SB & Corn Advisor (Cordonnier)• 112.5 mmt – AgRural – BR cons.• 112.2 mmt – INTL FC Stone

November CBOT Soybean Futures

DTN Prophet X – 02-13-19 pm

December CBOT Corn Futures

DTN Prophet X – 02-13-19 pm

Sep. MGEX Spring Wheat Futures

DTN Prophet X – 02-13-19 pm

Questions?