China Has Been Taking More U.S. Beans Than Thought

November 26, 2013 12:10 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are trading 4 to 5 cents lower, soybeans are 2 to 4 cents lower and wheat futures are steady to 5 cents lower with SRW contracts leading the declines. The weaker tone is likely to continue into the daytime session unless some bullish demand news surfaces. Light volume is expected ahead of the upcoming Thanksgiving holiday. Cattle futures are expected to open mixed this morning, while hogs are called steady to slightly firmer.


* Big revisions to weekly soybean export inspections. Some market participants were abuzz Monday when cumulative weekly soybean export inspections from USDA for the week ended Nov. 21 grew by a larger amount than the weekly inspections figure. The cumulative total of 585.634 million bu. of soybean inspections for 2013-14 increased by 76.768 million bu. from the prior week whereas soybean export inspections for the week ended Nov. 21 were reported at 66.934 million bushels. The higher cumulative figure was due to a total of 9.834 million bu. in "corrections" to prior reports dating back to mid-October that were reported by USDA. All of the corrections involved shipments to China. USDA typically releases corrections to prior reports as part of the weekly update, but the level of the corrections yesterday was greater than "normal," which spurred questions.

The long and short of it: The revisions show China's appetite for U.S. soybeans since mid-October has been even stronger than previously thought.

* Winter wheat ratings decline, but crop heads into dormancy in good shape. USDA's final winter wheat crop condition ratings of the fall showed 62% of the crop rated "good" to "excellent," while 8% was rated "poor" to "very poor." That's a 1-percentage-point decline in the top two categories and a 1-point increase in the bottom two categories. When those crop condition ratings are plugged into the Pro Farmer Crop Condition Index (0 to 500 point scale), the HRW crop declined 3 points to 363 while the SRW crop dropped 2 points to 378. The HRW CCI rating is 68 points higher than year-ago, while the SRW CCI rating stands 1 point lower than last year's final update of the fall.

The long and short of it: While winter wheat crop ratings have declined slightly from their peak this fall, the crop (both HRW and SRW) goes into dormancy in very good shape, which will limit crop concerns through winter unless weather turns highly unfavorable.

* China to let market factors have greater role in determining grain prices. China plans to allow market factors gradually play a greater role in setting grain prices whereas the current system relies on government support prices and stockpiling. China Economic Times newspaper quotes Fang Yan, rural economic director at the National Development and Reform Commission, as saying,"Grain prices have come to the stage to be decided by the market." She says the Chinese government is likely test the market-pricing system with one unspecified market while "temporarily extending" price controls for the staple grain markets of wheat and rice.

The long and short of it: In addition to allowing market factors play a greater role in determining grain prices, China also appears likely to lower its long-term self-sufficiency targets for grains as part of its 10-year plan.


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