Slow news week in the marketplace… for now. Markets are closed on Thanksgiving Thursday with a shortened day on Black Friday.
Market advisor John Heinberg says December grain futures hit their first notice day on Friday. This is the first day for notice of intent to deliver a commodity to fulfill a futures contract.
“That alone could bring some movement into the marketplace as money is moving around, changing positions,” explains Heinberg of Total Farm Marketing. “So, the next few days could be pretty choppy just because of the thin trade, and then bring in that factor that we’ve got to manage these December positions before the end of the week.”
In other agribusiness news this week, Brazil and China have signed 37 deals on everything from agriculture and trade to investments, energy and mining, industry, tech cooperation, and more. This relationship continues to blossom as China strategizes to retaliate against potential tariffs. President-elect Donald Trump has dropped hints he might impose a minimum tariff rate of 60 percent on Chinese imports.
Heinberg says China has already been making investments in trade infrastructure in both South America and Mexico.
“They put a lot of money into a port in Peru… so it gives a little bit more direct access, cheaper shipment. A rail system is being put together that brings products out of Brazil to that port in Peru,” he says, adding that China is also expanding a major port in Mexico.
Heinberg says domestic demand is going to be key if these trends continue. That’s where ethanol comes in to play. Ethanol production is well ahead of pace this year, helping to eat up the large domestic corn supply. Unfortunately, Heinberg predicts this momentum to slow down.
“We’re starting to see some erosion in terms of some of the profit margins from the ethanol producers,” he explains. “Crude oil prices are softer, energy prices are softer, corn prices have elevated since the fall lows. Those margins have tightened up, so maybe that ethanol demand starts slowing.”