Trade talks between the U.S. and China have hit a snag that may jeopardize the entire negotiation process.

The United States stated that existing tariffs would not be rolled back and has no plans to do so. The logic behind this is that the U.S. would then have no bargaining power as negotiations move forward. While speaking at the Economic Club of New York recently, President Trump stated that a deal with China was “close” and that China was “dying to make a deal.” The market wrote off this statement, and instead wants to see actual business being done. If no deal is reached, the next round of U.S. tariffs on Chinese products are set to go into effect on Dec. 15.

There are also growing concerns over existing soybean sales the US has with China. There is a reported 66 to 88 million bushels of U.S. soybeans sitting in Chinese ports waiting to be unloaded. Some of these vessels have been staged since September, and the demurrage cost of this has been in the millions of dollars. Chinese officials claim port facilities are full and cannot unload the waiting vessels. It would not be surprising to see Chinese buyers wash out of bookings if this persists. We may also see a hesitation of buyers to book soybeans given the chance of not having them delivered in a timely manner.

Even as the U.S. harvest progresses, country movement of corn and soybeans remains light. This is the primary result of lower yields and increased storage capacity. Farmers are also willing to wait for a market recovery before extending coverage. The recent Market Facilitation Payments have given many enough revenue for now that they can delay sales in hopes of higher values.

This low country movement has caused basis to firm in several areas of the Corn Belt. The most improvement has been in the East where harvest is slower. Reduced yield reports in this area are also causing buyers to push for what deliveries they can secure. Many buyers across the Corn Belt have resorted to alternative contracts to simple sales to secure bushels, including deferred pricing, reduced drying charges, and free storage.

Another country seeing limited movement right now is Russia on wheat. Even with wheat values trading at six-month highs, farmers in Russia have marketed few bushels. Farmers have adequate cash reserves from earlier sales and are waiting to see if the market appreciates even further before extending sales. Storage in Russia has expanded in recent years the same as it has in the U.S. and other grain producing countries, which is also allowing for more holding of inventory. This may not make Russia a bigger competitor in the global market, but rather we could see a longer period of competition on a whole.

Russia is also harvesting their corn crop and yields are coming in much higher than expected. The average corn yield in Russia is now at 87.8 bushels per acre, a record for that country. The USDA is forecasting total corn production in Russia to be up 14.6% on the year but analysts in the country believe it will be even higher. With Russia’s corn harvest at 67%, it is expected yields will be up 29% and total crop size will increase by 7%.

Ever since the start of the current marketing year we have been faced with poor corn export performance, but this may be coming to an end. The main reason for the slow demand for U.S. corn has been competition from other sources, mainly Brazil, Argentina, and Ukraine. While Ukraine still has corn for export, Brazil is nearing the end of what is their typical export window. We are also seeing Argentina absent from the export offers from December forward.

Updated numbers on Chinese hog losses vary considerably from previous totals. According to the Chinese National Bureau of Statistics, Chinese hog losses in the first nine months of 2019 from African Swine Fever totaled 28.5% of production. This is a considerable difference from the country’s Ag Ministry claim that 41% of hogs have been lost. This lower number would answer the question as to why China has been importing less pork that expected.

The USDA has released its baseline estimates, which are their long-term supply and demand forecasts. These numbers are basically the precursor to the Ag Outlook Forum data that is released in February. For corn, the USDA believes carryout will jump to 2.15 billion bushels in the next marketing year and reach 2.81 billion bushels by the end of the 2024/25 year. Soybean carryout will build to 518 million bushels next year and range from there to 616 million bushels for the next four years. Wheat ending stocks are forecast to decrease to 950 million bushels next year, then hold close to 900 million bushels through the next four years.

A growing number of U.S. farmers are going to third party lenders for financing needs. This comes on a tightening of credit that most borrowers are seeing across the U.S. The concern with this is that some of these lenders do not follow the same regulations and guidelines that traditional lenders do, and farmers are facing very high interest rates. As a result, more U.S. farmers are facing economic issues, including bankruptcy.

This commentary is the sole opinion of Karl Setzer, market adviser for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to contact Karl at You can also follow Karl on Twitter via @ksetzergrains.