Aug 29, 2014
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Cash Grain Insights

RSS By: Kevin McNew, AgWeb.com

Kevin McNew is President of Grain Hedge and Geograin. McNew was raised on a farm in central Oklahoma and received his bachelor’s degree from Oklahoma State University, and master’s and Ph.D. degrees in Economics from North Carolina State University. For over a decade, he was a Professor of Economics at the University of Maryland and Montana State University, focusing on commodity markets. He has received numerous academic awards for his research and outreach work, and was (and still is) widely regarded for boiling down complex economic issues into easy-to-understand concepts for applied life.

 

Chinese Crushers Default on Bean Purchases

Apr 10, 2014

 Grains were weaker overnight following Wednesday’s volatile trade from the latest round of USDA supply and demand data. In the night session, beans were down 10 cents while wheat and corn gave up 3 cents a bushel.

USDA’s supply and demand report released on Wednesday showed tightening US corn and soybean carryout. For corn, USDA raised US exports by 125 MB, which led to an equal decline in ending stocks at 1,331 MB, and below trade estimates going into the report of 1,403 MB. For soybeans, exports were raised by 50 MB over the previous forecast in March, but imports were raised 30 MB to a record high level of 65 MB if achieved. These adjustments, combined with a 5 MB drop in crush cut into the US carryout by 10 MB from the March forecast, and now stands at the razor thin mark of 135 MB.  

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While the markets were spurred on immediately after the report, prices quickly eroded as sell triggers were reportedly hit and farmer selling was said to intensify. May corn breached below the $5 mark but managed to inch above it in the night session. Overnight there was chatter that several Chinese soy crushers were going to announce a default on soybean export deals in the wake of poor margins in China and this morning it was confirmed. Chinese importers have defaulted on at least 500,000 MT of U.S. and Brazilian soybean cargoes worth around $300 million, the biggest in a decade, as buyers struggle to get credit amid losses in processing beans. Three companies in the eastern province of Shandong had defaulted on payments for shipments as they were unable to open letters of credit with banks.

For wheat, prices continue to be dogged by ample world supplies. World wheat carryout increased from 183 MMT to 186 MMT in the latest supply and demand report. Also, logistics problems in Canada seem to be waning as CN Rail announced it would be meet the government target to move 500,000 MT of grain for the week in Western Canada. In the drought stricken US Plains, the weather looks dry over the coming days with only a modest chance of a rain even towards the beginning of next week. The next month should be critical for crop development there.

WEEKLY EXPORT SALES (in thousand metric tons)

 

OC Actual

OC Expected

NC Actual

NC Expected

CORN

960.6

700-900

37.9

0-200

SOYBEANS

66.2

0-150

19.3

100-300

WHEAT

336.4

250-375

310.5

150-300

     

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