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Treasury Secretary Scott Bessent didn’t tell soybean farmers or market bulls what they wanted to hear when he described President Donald Trump’s meeting with Chinese leader Xi Jinping to CNBC.
Bessent told the cable news channel that the soybean issue had effectively been settled back in October when Trump and Xi met in South Korea and struck a one-year trade truce that saw China resume U.S. soybean purchases after last year’s trade-war-inspired boycott. Traders went into this week’s summit clamoring for signs that China might step up purchases beyond the 25 million metric tons per calendar year for the next three years that the administration says Beijing has committed to. Bessent did also offer China some unsolicited advice:
- “And then soybeans, we have a very large purchase commitment from the Busan agreement for the next three years, so beans are really all taken care of,” he said. “Although if I were the Chinese, I’d probably buy more beans now because there’s a weather pattern called El Nino that we’re probably going to see this year that typically results in very high soybean prices.”
Bessent’s weather forecast didn’t offer bulls much consolation. July soybeans fell 36 ½ cents to $11.92 ½, hitting a three-week low. July corn slumped 13 ¼ cents to $4.67 ½. U.S. lawmakers, who had visited Beijing, and others had touted the possibility ahead of the meeting of China making commitments to buy a range of agricultural products in addition to soybeans.
Trump and Xi will meet again Friday, but so far explicit commitments have been few and far between.
Even what appeared to be a victory for U.S. beef exporters was left in question. News reports said Chinese customs had approved the restoration of licenses amid the summit meeting. But a few hours later those clearances appeared to be halted, according to Reuters.
Boeing’s Beijing bust: It wasn’t just soybean bulls who were left underwhelmed. Shares of Boeing Co. dropped 4% on Thursday after Trump told Fox News that Xi had agreed to buy 200 planes from the aircraft maker. “Boeing wanted 150,” Trump said.
Investors were expecting a bigger deal. Beijing and Washington last year had been discussing a deal that could include fresh orders of hundreds of jets, the Wall Street Journal noted, observing that other media outlets had reported that as many as 500 jets could be part of the order.
El Nino chances: An El Nino may indeed be likely soon. The Climate Prediction Center on Thursday put an 82% probability it will occur during May-July 2026 and continue through Northern Hemisphere winter 2026-27.
El Niño occurs when sea surface temperatures rise at least 0.5 degrees Celsius (0.9 degrees F) above average across the central and eastern equatorial Pacific, notes AccuWeather. A super or very strong El Niño is defined when those temperature anomalies exceed 2.0 degrees Celsius, the forecaster said, noting that the threshold has been breached only a handful of times since 1950. The most recent Super El Niño was during the winter of 2015-16.
Mexico suspension: Mexico, the largest export market for U.S. pork, suspended imports from the U.S. of breeding pigs, semen, viscera and pork offal products after U.S. authorities detected pseudorabies virus antibodies in some swine, Reuters reported Thursday, citing the head of Mexican pork producers’ group Opormex. The suspension affects about 10% of Mexico’s total pork-product imports from the U.S. but does not include pork meat because it does not pose a transmission risk, Opormex’s Ivan Espinosa told the newswire in an interview.
USDA on April 30 said that routine testing detected pseudorabies virus antibodies in five boars at a commercial facility in Iowa, which came from an outdoor facility in Texas. It marked the first known U.S. case of pseudorabies, a contagious disease, in commercial swine since 2004.
Kansas carnage: The final estimate from the Wheat Quality Council’s annual crop tour put the average for Kansas at 38.9 bushels per acre after 394 field stops, according to Bloomberg. That’s well below last year’s forecast of 53 bushels per acre, with a survey of the tour’s participants pegged Kansas wheat production at 218 million bushels, the second-lowest going back to 1972. That’s a drop on a scale that affirms the 25% drop in winter wheat production forecast by USDA in its Tuesday Crop Production Report. USDA pegged all wheat production at 1.561 billion bushels, well below the average estimate of 1.747 billion bushels and down from 1.985 billion bushels last year for the smallest crop since 1972.
- “It’s a nightmare out there,” Vance Ehmke, who grows wheat for seed, told Bloomberg. “You don’t know whether you’re coming or going with this weather.”
Bond market’s message: The AI frenzy saw stocks touch another round of all-time highs Thursday even as bond yields continue to surge higher. The Dow Jones Industrial Average closed above 50,000 for the first time since February, while the S&P 500 hit a record high. At the same time, Treasurys and other major sovereign bond markets are selling off, pushing up yields, which move opposite to price. The 10-year Treasury yield traded at 4.46% on Thursday, up half a percentage point from late February and a roughly 11-month high. Rising yields, especially when moving quickly, can be a problem for stocks, particularly for high-flying tech stocks whose value is based on very long-term earnings expectations. A higher “risk-free” Treasury yield makes those cash flows worth less in present value terms.
There’s also the notion that the bond market is more attuned to the realities of the economy than the stock market. Indeed, Treasury yields are rising in part due to expectations inflation pressures will force the Fed toward eventual rate hikes.
Nicholas Colas, co-founder of DataTrek Research, summed it up in a Thursday note, arguing that the Treasury market is a much better place than the stock market to look for clues about future economic conditions. He wrote:
- Its message is clear: structural inflation pressures are increasing, and the Fed will have to raise rates.These issues alone are not a growth risk but, if the Fed gets behind the curve, then the possibility of a policy mistake increases.This concern would spill over into stocks, as it did in 2022.
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