China Shopping for U.S. Soybeans?

January 19, 2012 12:16 AM

What Traders are Talking About:

* China shopping for U.S. beans? Rumors late Wednesday that China is shopping for U.S. soybeans helped futures trim losses and finish well off session lows. While Chinese demand for U.S. soybeans has been slow for the past several months, there are reasons it could be increasing. In addition to the sharp drop in soybean prices recently, rains are delaying early harvest efforts in Mato Grosso, Brazil. Instead of having beans to export by now, the harvest delays have left ships waiting to be filled at Brazilian ports. Plus, the heavy late-season rains are causing quality concerns with the early harvested Brazilian crop. Also, there are reports out of China that most of the major producing areas have sold their soybeans and processors will be turning to imported soybeans once port stocks start to decline. A ramp up in Chinese soybean processing is expected following next week's Lunar New Year holiday as crush margins have reportedly turned positive after months of running in the red.

The long and short of it: Brazilian harvest delays could boost Chinese demand for U.S. soybeans and give soybean futures an unexpected short-term price pop.

* South American weather update. Forecasts continue to call for rain chances across Argentina through the weekend. The system is expected to move rather slowly, which has caused some private forecasters to bump up rainfall amounts. The rains are expected to move into southern Brazil late in the weekend and continue early next week. While Parana and Mato Grosso do Sul are expected to see beneficial precip, current forecast models suggest Rio Grande do Sul may again miss out on much of the rain event. Meanwhile, heavy rains in Mato Grosso, Brazil, continue to cause harvest delays and quality concerns.

The long and short of it: South American weather is a mixed bag, which is why price action has been highly choppy so far this week.

* IMF looking to boost funding. The International Monetary Fund (IMF) is seeking to raise up to $600 billion to help countries deal with the fallout of the euro-zone debt crisis. Of that, $500 billion would be for lending and $100 billion would be a "protection buffer." But the U.S., Canada, Japan and South Korea have all raised concerns about the IMF doing too much to bail out Europe. All four countries want Europe to do more to solve its problems. A meeting of G20 leaders is taking place today and Friday in Mexico. To boost funding, the IMF would need the G20 leaders to sign off.

The long and short of it: Hopes of sharply increased IMF funding to tackle the euro-zone crisis gave markets a shot in the arm overnight, but with some major opposition, the prospects of the extra funding coming to fruition are still up in the air.


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