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By Alice McFarlane

Year in Review

Year in Review: Commodity markets could rebound in 2020

Dec 31, 2019 | 3:34 PM

Exceed Grain Marketing senior consultant Wayne Palmer said farmers got a quick and difficult education on what it means to be shut out of Chinese markets.

But he said the news isn’t all bad heading into 2020 as China and United States are prepared to sign a trade agreement that will ultimately benefit Canadian farmers as well.

“China, basically, refrained from buying any grain from North America due to a trade agreement that they tried to put into place. Unfortunately, it lingered for 18 months,” Palmer told farmnewsNOW. “Due to that we had huge carryovers because China did not take the amount of grain they had in past years.”

Palmer said the loss of that market resulted in huge carryouts in canola, corn and soybeans.

“More supply and less demand. Prices started to deteriorate, erode. The funds came in and kept on selling. They put on record short positions in all the major grains and we hit contract lows. It was really a dismal 2019,” he said. “But going into 2020 everything looks much, much more rosy. We have a phase one trade deal between the United States and China. In January, the two presidents will sign the deal and if this becomes fact, they will take a lot of U.S. agricultural product.”

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Palmer said this was reflected in the December rally with all of the grains trading near season highs going into 2020.

“China is even saying they’re going to take some GMO products from the United States as well,” he said. “It looks like they’re now going to buy in all of their short positions meaning that 2020 looks very favourable for higher grain prices.”

Palmer was quick to caution that China has been an unpredictable buyer of commodities and farmers need to watch market news closely.

“China has been known to pull the rug out from under us before. If they don’t sign this trade deal, with the huge carryouts that we have lingering from 2019, then these prices are going to go right back down and and it’s going to go down very, very quickly,” he said. “I’m just very cautious. I don’t trust the Chinese. But if I had to put a percentage on it, this is going to be an 80 per cent done deal that this will be signed.

Palmer said he expects U.S. and China could be signing this deal between Jan. 10 and 15.

“If the U.S. and China deal doesn’t get signed, this market is going to hit rock bottom again, because we have way too much grain in North America and we need a buyer to take it off our hands,” he said.

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alice.mcfarlane@jpbg.ca

On Twitter:@AliceMcF