Rumors of China Cancellations
May 23, 2012
· Grain market collapsing yesterday on rumors that China had cancelled or possibly deferred corn and soybean purchases from the US; Reuters story on Monday indicating that China had defaulted on or deferred coal on iron ore purchases; Several indicators point to weakening Chinese economy
· Soybean making new lows for the recent move overnight; July contract now trading solidly below $14, Nov trading solidly below $13; Old vs. New spreads hold together despite flat price break
· Wheat futures sharply lower again overnight; July wheat posting a textbook blow-off top on Sunday night, posting massive volume at the highs
· Forecasters looking for increased rain chances next week, adding to pressure on corn market; Excessive heat still slated for this coming weekend
· Greek situation remains uncertain, pressuring outside markets
· USDA is seeking public opinion on whether or not it should change the release times of crop reports
· Some confusion among country grain elevators regarding new extended grain hours; Some elevators confused as to which closing price, 1:15pm or 2pm, should be used for afternoon bids; Settlement prices are still based on price action at 1:15pm
· Early estimates for 12/13 Brazil soy crop are much improved from this year’s crop; Reuters survey of panelists at Sao Paulo soy seminar showed average guess near 73.6mmt; Government expecting the 11/12 crop near 66.7mmt; Brazil is the world’s #2 soybean producers behind the United States
· Some rains forecasted for Black Sea wheat areas, adding to pressure in wheat market yesterday/overnight; Hot/dry April was preceded by an unusually cold January/February; Many analyst looking for substantial declines in wheat crop there despite forecasted rains
Yesterday’s collapse occurred on a perfect storm of bearish news. Rumors of China cancellation along with increased chances of rain next week were too much for the markets to handle. Corn charts in particular still continue in loose downtrend. As we’ve said now for a few weeks, we believe the highs have been seen in the soybean market barring a significant weather threat. An almost guaranteed acreage increase here in the US combined with potentially large South American acreage this fall will be weights on the market.
As always, call the office with questions or concerns.