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-Bi-lateral tariff reductions expected as part of Phase One trade deal
-Longer-term impacts of ASF examined in study
-China considers lifting U.S. poultry import ban
-USDA announces soybean/SBM sales
-Attache sees Russian wheat crop above USDA
-Flat palm oil production outlook supports vegoil price expectations
-USDA reports tomorrow

USDA’s monthly Crop Production and WASDE supply/demand balance sheet reports will be released on Friday. Our pre-report commentary/analysis can be found on Market Insights at https://portal.rjobrien.com/MarketInsights/Blog/Read/37918. A summary of the average trade estimate is on the last page.

 Chinese officials have said both sides have agreed to reduce some import tariffs in stages as part of the negotiations to ink the “phase one” trade deal. While details are sketchy, in principle, a Chinese Commerce Ministry spokesman said, “…based on the content of that agreement, tariffs already increased should be canceled at the same time and by the same rate.” China reportedly wants the 15% tariffs imposed in September on $125 billion of Chinese products to be removed for the “phase one” deal to be finalized. In other trade war developments, latest ideas have pushed an expected signing of the “phase one” deal into December as negotiations continue.

 USDA reported the sale of 136k tonnes of soybeans to China and 133k tonnes of SBM to the Philippines for 2019/20 delivery this morning.

 A study commissioned by the U.S. pork industry said China’s pork imports are expected to top out in 2022 as a result of the African swine fever epidemic, with rising imports expected over the next three years to account for the massive loss of domestic pork production. The report indicated expectation for Chinese pig production to recover by 2027, but with the expectation pork production will still be 13% lower then than it was prior to the start of the ASF outbreak last year. The expected lower domestic pork production is not necessarily viewed as an issue by the study, though, as it reflected expectations for an overall 20% decline in Chinese pork demand from 2018 levels in the post-ASF marketplace.

 The FAO said they expect global pigmeat production to decline 8.5% in 2019 as a result of ASF outbreaks across Southeast Asia, with Chinese production specifically falling 20%.

 China is reportedly considering lifting the ban on poultry and egg imports from the U.S. put in place in January 2015 as a result of avian influenza cases at the time. The U.S. exported $390 million in poultry/products to China in 2014 prior to the ban.

 Brazil officially implemented the 750k tonnes/year tariff-free wheat import quota announced in March, a few months earlier than originally expected. The new quota will allow tariff-free wheat imports from any country up to the 750k tonne limit, where previously imports from non-Mercosur countries were assessed a tariff. Brazil typically imports around 7 MMT of wheat annually, with the vast majority of it from Argentina. The U.S. is likely to see a bump in wheat exports to Brazil, but hardly would be considered a significant impact.

 The USDA ag attaché in Russia sees their wheat crop at 74.0 MMT, modestly above the USDA’s last official estimate of 72.5 MMT and last year’s 71.7 MMT, but sees 2019/20 wheat exports at 34.0 MMT, in line with USDA and down modestly from last year’s 35.7 MMT.

 Palm oil industry analyst Dorab Mistry said he expects Indonesian palm oil production in 2020 to rise just 1 MMT from this year, while Malaysian palm oil production is expected to decline by 1 MMT. Combined with rising biodiesel mandates in Indonesia and Malaysia next year expected to prompt solidly higher domestic usage of palm oil, reducing exportable supplies, and pulling down stocks, the stagnant production outlook should bolster veg oil prices overall for the coming year.

 Please see our Market Insights post at https://portal.rjobrien.com/MarketInsights/Blog/Read/37877 for details on the USDA Export Sales report.

 U.S. soybean sales were strong at 1.807 MMT (66.4 million bushels), coming in well above market expectations of 600k-1.2 MMT, with net sales to China on the week of 760k tonnes.

 U.S. corn sales were weak again at just 488k tonnes (19.2 million bushels) and while they were within market expectations of 300-650k tonnes, they were considerably below the roughly 32.1 million bushels/week they need to average in order for the USDA’s 1.900 billion bushel export projection to be reachable.

 U.S. wheat sales last week were disappointing at just 361k tonnes (13.2 million bushels), at the extreme bottom of market expectations of 350-600k tonnes and down from the previous week’s 18.2 mil bu.  U.S. soybean meal sales last week were strong at 262k tonnes, at the upper end of market expectations of 150-300k tonnes and the 2nd highest of the first 5 weeks of the 2019/20 marketing year. Soybean oil sales were minimal at just 3.8k tonnes (5-25k expected), but followed last week’s strong sales of 30k tonnes.

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