Trade War Truce Pushes Feed Higher

By December 16, 2019 February 11th, 2020 No Comments
December 16, 2019
Over the weekend, China confirmed that a Phase 1 trade agreement could be signed very quickly.
Though details of the agreement are scant, what we do know is that its 86 pages. New tariffs will not go into effect and one of the old tariffs will be cut in half, to 7.5% on a $120 billion worth of Chinese goods. U.S. tariffs of 25% on $250 billion worth of Chinese goods will remain unchanged – which will be used to pursue a Phase 2 deal.
China hasn’t said much in the way of what it will purchase, but U.S. officials say China will double its imports to $200 billion over the next two years.
While no hard numbers have been stated by the Chinese, officials did confirm it would be buying wheat, rice, corn. Presumably also soybeans and hopefully some dairy goods.
As you can see in the image below, everything is up as of 11 AM Monday. And those are pretty big one day moves.

As we discussed last week, whole cottonseed is likely to remain high for the remainder of this crop year. The Cottonseed Digest, which comes out on Friday afternoons, opened its weekly newsletter with the grim news:
The big story again this week is the firming of the West Texas market. Seed traded this week spot Lubbock North at $285, with trades ranging from $278 to $285. For Jan/Sep trades have ranged from $287.50 per ton to $298 per ton with offers at $300. This jump in Texas prices has pulled up prices across the country.
While many California dairy farmers are contracted at $280 FOB, cottonseed is trading higher than that today in cotton country. If you’re still short on your cottonseed needs, our advise is to get covered if these values still pencil.
To get our number, give your sales rep a call or text.
Thank you,
Paul Quinn