By MICHELE F. MIHALJEVICH

Indiana Correspondent

MCHENRY, Ill. — The commodities market is looking for something tangible in trade negotiations with China to create excitement and potentially raise prices, two Allendale, Inc. analysts recently pointed out.

Under a partial deal with China announced Oct. 11, the White House agreed to delay implementation of a planned tariff increase from 25 percent to 30 on $250 billion in Chinese imports. The increase had been scheduled to go into effect Oct. 15.

The agreement calls for China to purchase $40 billion-$50 billion in agricultural products annually. A few days later, reports surfaced that China wanted more talks before signing a deal.

The market is dealing with “headline fatigue” about the tariff situation with China, said Steve Georgy, Allendale president. “I think it’s one of those where we need to get something done,” he explained. “We hear one perspective. We went home on (Oct. 11) talking that we were going to have this deal done – phase one – and it was going to be $40 to $50 billion of agricultural products.

“Now we don’t know exactly what agricultural products is, we don’t know where that demand really is going to come, so there were a lot of holes. But the market had gotten excited. Now we hear today (Oct. 15) that $50 billion is way too high, and then you get kind of this backlash. It’s almost this disappointment once again.”

The sales to China that have occurred give the market some encouragement, Georgy noted. The market is tired of optimism being crushed, he added.

“This whole thing with China is up in the air,” he said. “The disappointment that we have gotten over and over is still lingering. I’m not sure if something will get done. It may take until the (2020) election before we see something set in stone.”

The value of U.S. agricultural exports to China ranged from $19 billion-$24 billion in the four years before the trade war started, said Rich Nelson, Allendale’s chief strategist. In 2018, the total dipped to $9 billion; so far in 2019, it’s $7.9 billion.

Without the partial China trade deal, Allendale forecasts 2019 soybean ending stocks at 477 million bushels. The USDA anticipates 460 million.

“If China does come in and buy 30 million metric tons (of soybeans) and they’re all allocated for this specific marketing year and we ship it all out by the end of August, that would be really exciting, obviously,” Nelson explained.

If the “dream scenario” goes through, prices could be in the $10.50 range, he said, with ending stocks anywhere from 200 million-280 million bushels.

For corn, U.S. export commitments as of Oct. 3 were 52 percent under last year, Nelson said. The USDA’s goal is an 8 percent drop.

“Let’s be honest here,” he cautioned. “This is a terrible corn export situation. This is not a China issue; remember, China doesn’t buy much corn from us. This is really a Brazil competition, as well as tariff concerns from our main buyer, Mexico.”

Mexican purchases of U.S. corn are off 17 percent from last year. Sales to Japan, another big buyer of U.S. corn, are down 58 percent this year versus 2018, Nelson said.

Allendale is forecasting a corn yield of 167.7 bushels per acre, and for soybeans, 46.6. USDA is estimating 168.4 for corn and 46.9 for soybeans. The numbers could change if the late-planted crop is impacted by weather, he pointed out.

Kentucky and Tennessee farmers were the only producers in this region to be ahead of last year’s corn and soybean harvest, according to the Oct. 15 crop progress update from the USDA’s National Agricultural Statistics Service. Iowa and Michigan producers had harvested 7 percent of their corn, while Illinois (23 percent), Indiana (24 percent), and Ohio (16 percent) were also off last year’s pace.

For soybeans, Illinois farmers had harvested 27 percent of the crop; Indiana, 30 percent; Iowa, 17 percent; Michigan, 18 percent; and Ohio, 36 percent. All were behind last year.

The percentage of the corn listed as fair or better condition ranged from 73 percent in Indiana and Ohio to 97 in Tennessee. For soybeans, the range was 72 percent in Indiana to 92 in Iowa.