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US farmers eye Trump’s China trade policy

US trade policies under Donald Trump will be key to agricultural commodities next year, as the world continues to grapple with high levels of grain production and inventories, according to a leading forecaster.

“The area of concern is whether anything is going to happen that is going to affect our trade with China, which is a big agricultural buyer,” said Don Riffe, senior vice-president for agribusiness intelligence unit at Informa, a key grains forecaster whose data are widely followed by market participants.

Mr Trump’s anti-globalisation campaign platform during the elections has raised concerns about protectionist economic policies and the impact on US imports and exports of commodities, especially with China.

Despite concerns about China’s economic growth slowdown earlier in the year, agricultural exports to the country have remained firm, especially from the US in the face of drought and adverse weather in Brazil and Argentina.

China’s active imports of soyabeans from the US have kept the commodity at about $10 a bushel even in the face of record world production, which Informa estimates to have totalled 340.5m tonnes in 2016/17.

Informa expects farmers, especially in the US, to switch their crops out of corn into soya, and the planted area to rise in 2017/18 to 125.5m hectares, up 4 per cent from the year before. World production of the oilseed is predicted to decline marginally to 338.9m tonnes, but usage is forecast to increase 3.5 per cent to 340.3m tonnes.

Production levels for key grains including wheat, rice and corn are also forecast to fall slightly after a year of record output in 2016/17, although they are still elevated.

Supplies of grains and oilseeds remain plentiful, and “we are looking at another year ahead where there’s abundant supplies”, said Mr Riffe.

For corn, Informa expects production to fall almost 4 per cent to 1bn tonnes in 2017/18, helping inventories to decline about 14 per cent to 195.6m tonnes. Wheat production is expected to fall back 1 per cent to 736.6m tonnes, although with usage also dropping, inventories are forecast at another record high of 247.7m tonnes.

While adverse weather is always a risk, other forecasters have noted volatility in the global currency markets as a potential cause for volatility for agricultural commodity prices during 2017.

In its annual outlook, Rabobank said the euro was likely to depreciate as a result of French, Dutch and German elections during 2017. This will be good for European farm exports. The fall in the pound after the Brexit vote in June has pushed up British grain exports to the highest level for almost 20 years, the bank said.

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