Can the Tight Bean Supply Trump China Cancellations?
Feb 12, 2014
Soybeans continue to dance to the same song... Will bearish headlines of Chinese "cancelations" come to fruition or will the bullish headlines of extremely tight US supplies continue to play to the crowd? As we move forward lets just keep in mind we still have nearly 5 million metric tons of US soybeans left to load and ship to China. If they back out now the trade will become extremely spooked, believing prices are simply too high to justify the lack of continued US export demand. If the Chinese don't back out, the trade will start to become more and more concerned about how and where we are going to find the bushels needed to supply the ongoing Chinese demand. One thing we have to keep in mind is the fact beans are now freely flowing out of Brazil. Most reports indicate close to 1 million metric tons have already been loaded and set sail for China during the month of February. Its believed there are another 3 million tons projected to load and ship before month end. Bottom-line, China has definitely made the move to Brazilian beans, but we still haven't heard confirmation of "cancelations," at least not yet??? There is also some concern form inside China that the Brazilian beans may show up much quicker and in a bigger dose than the Chinese importers had anticipated. With crush margins in China backpedaling a bit as poultry and pork demand seems somewhat suspect, a glut of soy supply showing up on their doorstep from both the US and Brazil might be enough to tip the scale in a more bearish direction. In fact there are rumors of Chinese crushers trying to cancel more than 500,000 tons of US beans to avoid the glut. The verdict on this rumor is obviously still out. Maybe tomorrows weekly USDA sales data will confirm or prolong the whispers. The bulls in the trade continue to keep a close eye on South American production, though record large, conditions are starting to be questioned more than ever. Logistical concerns are also starting to arise in some capacities. The latest estimates, depending on the port of choice, show anywhere from 2-weeks to 30-day wait times already occurring to unload beans. Producers who still have old-crop bushels to price might want to pull-the trigger sooner rather than later or find a way to limit your downside exposure by building some type of floor or hedge above $13.00. We are keeping our old-crop cash sale signals in place just up above $13.50 but I am making certain we have 100% downside protection just in case this market runs out of steam before my price points are hit. Click here for my daily report..