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Is the Chinese trade deal going to be enough?

Weather, ethanol usage and South American production are also players in the marketing game.

Kevin Van Trump

May 2, 2019

2 Min Read
U.S. and China impact on trade market
jxfzsy/Getty Images

Corn bulls are pointing to more wet and cool conditions in the forecast which will further delay U.S. planting, starting to hear more talk of perhaps 3 to 5 million acres going to "preventive plant".

Bears might also be backpedaling a bit on more rumors that a trade deal with China could be finalized by May 10. Weather here in the U.S. will continue to bring ongoing delays, especially in parts of Illinois, Kansas, Kentucky, Missouri and Tennessee. There are also many other areas in prime growing regions that are facing extreme conditions.

The USDA reported corn used for ethanol in March at 441.7 million bushels vs. last year's March ethanol usage of 472.9 million bushels. In other words, we used 31 million fewer corn bushels in March this year compared to last. If you look back on the past seven months of the marketing year, we've used about 150 million fewer bushels of corn for ethanol. Which allows the bears to talk about a further reduction in the USDA's corn used for ethanol estimate. Hopefully, the Chinese will come in and help reverse those thoughts and bring some fresh buying to the space. 

As for South America, I continue to hear talk and rumors, from boots on the ground, that production estimates are creeping higher. In fact, the USDA's ag attaché over in Argentina is now forecasting this year’s crop at 49.0 MMT vs. the current USDA estimate of 47.0 MMT's vs. last year’s Argentine production of just 32.0 MMTs. Many traders and bearish fund managers, who are viewing the trade exclusively from a global perspective, argue that any early acreage losses or yield drag seen in the U.S., will be easily offset by a much larger crop out of South America.

As a spec, I'm still not jumping in to be a big buyer. I'm worried we could see a little head fake or bounce to the upside then another wave of selling pressure. Bulls have had a hard time building on momentum for the past several months, I don't see that trend changing, unless there's a major bullish pitch delivered inside the Chinese trade details. 

To stay in tune with my future recommendations check out my daily report.

About the Author(s)

Kevin Van Trump

Founder, Farmdirection.com

Kevin is a leading expert in Agricultural marketing and analysis, he also produces an award-winning and world-recognized daily industry Ag wire called "The Van Trump Report." With over 20 years of experience trading professionally at the CME, CBOT and KCBOT, Kevin is able to 'connect-the-dots' and simplify the complex moving parts associated with today's markets in a thought provoking yet easy to read format. With thousands of daily readers in over 40 countries, Kevin has become a sought after source for market direction, timing and macro views associated with the agricultural world. Kevin is a top featured guest on many farm radio programs and business news channels here in the United States. He also speaks internationally to hedge fund managers and industry leading agricultural executives about current market conditions and 'black swan' forecasting. Kevin is currently the acting Chairman of Farm Direction, an international organization assembled to bring the finest and most current agricultural thoughts and strategies directly to the world's top producers. The markets have dramatically changed and Kevin is trying to redefine how those in the agricultural world can better manage their risk and better understand the adversity that lies ahead. 

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