China Looking To Acquire Soybean Access

February 27, 2014 12:15 AM

What Traders are Talking About:

Overnight highlights: As of 6:10 a.m. CT, corn futures are trading 1 to 2 cents lower, soybeans are 1 to 7 cents higher in old-crop contracts and mixed in new-crop contracts, and wheat futures are 1 to 5 cents lower with HRW contracts leading losses. Cattle futures are higher in electronic trade, while hogs are mixed with a firmer bias.


* China negotiating to buy Dutch grain firm. State-owned COFCO, China's largest grain trading firm is reportedly in advanced talks to buy Dutch grain trading firm Nidera. The deal would provide China direct access to South American grain and soy supplies, with one Asian-based source telling Reuters the target for the deal is soybeans. Since China imports roughly four to five times as many soybeans as it produces domestically, it's no surprise China would try to secure direct access to more supplies.

The long and short of it: This deal would be similar to when China's largest pork producer Shuanghui bought Smithfield Foods to secure increased pork supplies.

* Argentina approves more wheat for export. Argentina approved another 500,000 MT of wheat for export Wednesday, according to an Argentine government source. Argentina has now authorized 1 MMT of wheat for export in 2013-14. The Argentine government has previously said it will allow 1.5 MMT of wheat exports in 2013-14 but was waiting to make sure production covered domestic needs before giving exporters the green light. The country's economy minister says "everything" that's not needed for domestic consumption will be exported.

The long and short of it: The news triggered a selloff in wheat futures late Wednesday as traders fear less demand for U.S. wheat. But the U.S. attache in Brazil says Brazilian millers indicate they will continue to buy U.S. wheat since Argentina is a "problematic supplier" due to its current economic problems and government intervention in the wheat sector. The attache says, "Increased demand and economic issues in the Argentine market, combined with U.S. wheat's reputation for quality and reliability create a favorable climate for U.S. wheat in 2014."

* Russia to resume some U.S. pork imports. Russia will resume imports of U.S. pork that are ractopamine-free on March 10, according to the country's health safety watchdog Rosselkhoznadzor. Russia banned imports of U.S. pork in February 2013 because of the use of ractopamine. The banning of all U.S. pork shipments, even those that could be proven ractopamine-free was a clear indication it was politically driven.

The long and short of it: The partial lifting of the ban now suggests Russia needs pork. The country has a history of finding "problems" when supplies are plentiful.



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