Local Grain Prices Responding To Lack Of China Demand

By Carah Hart

Brownfield

An ag economist says the increased trade tensions between the U.S. and China are starting to negatively impact soybean prices.

“We haven’t seen a big response in the futures market, but we have in the cash market,” says Frayne Olson, North Dakota State University Extension.

China hasn’t purchased any U.S. soybeans for the new crop marketing year. And Olson says basis levels have become much more negative in North Dakota.

“Normally, this time of the year we have a minus 70 to minus 90 cents per bushel basis during the harvest window. Today, the range is from a minus $1.35 to a minus $1.60.”

Olson says basis has also been widening in Minnesota and South Dakota, but not as much as North Dakota. According to Olson, basis was $2 below the futures price during the first trade war with China.

Olson says there will be delays in grain flow.

“We’re not going to have a lot of trains moving out to the west coast during the middle of harvest. That means some of our grain might back up and be stored on the farm, or the storage capacity of the grain elevators might be stretched thin, because we also have a large crop coming.”

He tells Brownfield China could come in and buy some soybeans “the question is: how much and when?”

Olson says one of the best ways for the U.S. to attract more business from China would be getting a new trade deal. He says it will likely be difficult for the two countries to compromise on technology issues and reach a full trade deal by the November 10 deadline.

“We’re making progress and coming to an agreement on the things we can agree to,” he says. “Are we going to be able to get a true free trade agreement with China? I doubt it. There’s always going to be some level of compromise.”

But he says it’s realistic to think an agreement with China could happen in stages.

“I think we’re going to make progress, we’re going to have intermediate steps, but to have a final agreement I think will be a long time coming.”

Low prices could help attract other customers, but Olson says it’s still hard for U.S. ag to replace the demand lost from one of the biggest markets for U.S. agriculture.