The Hueber Report

Queue the theme music from Jaws.  Just when you thought it was safe to go back into the water (market); Trade Tariff Terrors strike again!   Reuters news reported overnight that possibly as early as today, the Trump administration could propose a 25% tariff on another $200 billion in Chinese imports, which stunned the bean market overnight and for now at least appears to have stopped the recent rally in its tracks.  The irony here is that earlier yesterday, Treasury Secretary Steve Mnuchin was again making warm and fuzzy comments about getting together with his Chinese counterpart to discuss ways to improve trade, which was, in turn, helping bolster the rally. I guess who speaks last counts. While it would be nice to have someone sing the same song Mr. Mnuchin did or possibly even ignore the tariff bluster and focus on the hot, dry weather that is forecast for the Midwest of the next week or so but unfortunately, this is happening right at the moment beans have pushed against a level of stiff resistance and are reaching into an overbought position.  Without that, it would appear that we have milked about all we can from the upside in beans at this time. Thankfully the grain markets have not taken the recent threats quite as harshly, with wheat on the cusp of pressing into higher highs once and corn, just below yesterday’s highs.  Keep in mind here as well though that over the last couple week corn has rallied a bit more than 10% and wheat nearly 20% and both markets have reached into overbought positions.  While that along is not sufficient reason to call for a high, it should make one sit up and pay attention for signs of exhaustion. 

It should come as no surprise, but there are reports of yet another nation trying to position itself to take advantage of the U.S./Chinese trade tensions.  Nikolay Gorbachov (not sure if there is any relation to Mikhail), president of the Ukrainian Grain Association, stated that his nation sees big potential for increased grain and oilseed business with China and to quote, “The first reason is China’s consumption is rising, and the second is the trade war with the United States.” While China would not account for all of it, he expects Ukraine exports to reach the 55 to 65 MMT level over the next three to five years, compared with around 45 MMT currently.  As they say, you have to may hay while the sun is shining and there would appear to be no doubt that Ukraine, Brazil, and others are trying to position themselves into the Chinese market while they have the opportunity. 

We have not heard much about the plight of Bunge or its possible demise/takeover for some time, but it was in the news again this morning as quarterly earnings were released, which leaned to the disappointing side.  Interestingly enough, problems were not from the grain unit as volumes there were up 3.4%, and gross profits were more than double a year ago at $354 million, but rather from soy crushing operations. This group took a $125 million hit and overall earnings for the quarter came in below expectations. While I do not know if this well reignites talk of a possible buyout and/or merger with another firm but do take note that ADM also released quarterly results this week, which more than tripled from a year ago.  They are now looking at a company-wide net profit of $566 million. A tale of two companies indeed.