China To Stop Soybeans, Cotton Stockpiling Program

December 27, 2013 12:07 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are trading fractionally higher, soybeans are 4 to 6 cents higher and wheat futures are narrowly mixed. Cattle and hog futures are expected to open with a slightly firmer tone this morning. Light trading volume is expected in the grain and livestock markets throughout today's session as traders wrap up positions for the year.


* China to end stockpiling of soybeans, cotton. China will soon end its government stockpiling program for soybeans and cotton and replace it with subsidies for farmers, according to a Xinhua new report quoting the country's finance minister. The official says the Chinese government will set target prices for the two commodities and offer direct subsidies to farmers. Imports will reportedly be used to refill state reserves, when needed. The minister gave no specific timeframe for when the shift in policy will officially happen.

The long and short of it: The ending of cotton stockpiling was fully expected. The question now is how aggressively China will try to sell the massive reserves the government has amassed. The change in soybean policy wasn't as widely expected, but China already relies on imports for the bulk of its domestic needs. This now means there will be slightly more Chinese soybean demand at times when the government needs to refill state reserves.

* Ministry raises December Chinese soy import forecast. China is now forecast to import 6.67 MMT of soybeans this month, according to the ministry of commerce, up from its previous projection of 6.34 MMT. The updated forecast is based on shipments received the first half of December. The ministry forecasts January Chinese soy imports will fall to 2.37 MMT.

The long and short of it: Though Chinese soy imports typically slow in January, the ministry's forecast is too low.

* DDG rejections point to more soymeal use. As I reported yesterday, China rejected the first 2,000 MT of U.S. dried distillers grain (DDG) shipments due to the presence of MIR 162 (Syngenta's Agrisure Viptera), which the country has not approved. Chinese quarantine authorities have confirmed those rejections and are now testing all shipments, so more rejections are coming. As China rejects more U.S. DDG shipments, there will be increased demand for soymeal as a replacement for the protein source in animal feed rations.

The long and short of it: As China rejects U.S. DDGs, it will increase demand for soybean imports. The unknown is how aggressively China turns away U.S. DDGs and for how long.

* Happy New Year! I'm taking next week off to spend with my boys, who are on Christmas break from school. I wish all of you a happy and joyous celebration as 2013 comes to a close and we ring in the new year. I'll be back the first full week of 2014. Happy New Year!


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