Trade Truce Between US and China
The week began with news of a pause in the US-China trade war following a weekend meeting between US Treasury Secretary Scott Bessent, US Trade Representative Greer, and their Chinese counterparts. The agreement included a 90-day reduction in tariffs, with the US cutting rates from 145% to a mutual 10% and 20% for fentanyl, lowering the tariff to 30%. China responded by setting a 10% tariff on all US goods, leaving room for broader discussions in upcoming weeks.
This trade truce led to positive reactions from stock markets and oil, while gold prices fell over $114 per ounce as investors deemed the market less risky.
USDA Reports and Market Impact
The US Department of Agriculture (USDA) prepared to release its monthly supply and demand report for May, which is crucial as it provides the first glimpse into expectations for the 2025/26 crop cycle. The report brought several surprises:
- Global Corn Stocks: The USDA estimated global corn ending stocks at 277.8 million tonnes, below the market expectation of around 298 million tonnes and lower than the previous cycle’s estimate of 287.3 million tonnes. This was seen as bullish by funds, triggering immediate buy orders in the market.
- Soybean Stocks: The USDA estimated global soybean ending stocks at 124.3 million tonnes, below the market expectation of 127.2 million tonnes.
- Wheat Stocks: The USDA estimated global wheat ending stocks at 265.7 million tonnes, higher than the market expectation of 260.6 million tonnes.
On the US front, the USDA increased production estimates for corn to 401.85 million tonnes, surpassing expectations of 401 million tonnes. Soybean production was estimated at 118.12 million tonnes, slightly above the expected 118.06 million tonnes.
Market concerns focused on the potential for reduced corn production if any issues arise during the growing season, despite the large estimated production. Such a production level would put downward pressure on prices.
Planting Progress and Future Uncertainty
The USDA’s planting progress report showed that 62% of corn acres had been planted, surpassing the five-year average of 56%. Additionally, 28% of corn had emerged, significantly higher than the typical 21% at this time.
These figures suggest the USDA anticipates strong demand, especially with reduced tariffs to China. However, trade and global economic conditions remain uncertain, particularly in China.
The coming months will be critical to observe the final planting acreage and corn pollination, which will determine the actual corn production.
In the past two weeks, the July corn contract on the Chicago Board of Trade dropped 1.23% to $174.40 per tonne, reflecting a more than $10 or 5.5% decline.
