Chinese Demand and Weather Keeping Soybean Traders' Attention

January 25, 2013 12:12 AM

What Traders are Talking About:

* China buying beans. USDA announced daily soybean sales totaling 510,000 MT to China and 113,000 MT to unknown destinations for 2013-14 yesterday. In addition, there's chatter China is shopping for old-crop U.S. soybeans as crushers are working with positive margins and are still looking for supplies to bridge the gap until new-crop South American soybeans are available. There's an expectation Chinese end-users will make a push to get soybean cargoes booked ahead of their Lunar New Year celebration, which starts Feb. 10.

The long and short of it: The 2013-14 soybean buys helped limit selling interest into the close yesterday, but until there's some confirmed 2012-13 purchases, buying interest will be limited as traders are more focused on record South American crop prospects.

* Argentine weather watch. Much of the recent price action in the soybean market has been driven by forecasts for Argentina and southern Brazil. Both have been trending drier, but rains fell on southern Brazil this week and precip is forecast for areas of central Argentina in the 6- to 10-day outlook. If those rains develop in central Argentina the second half of next week, soybeans will struggle to gain traction. But if this forecast rain event is a disappointment, expect soybean futures to make another push to the upside.

The long and short of it: Price action this week has been back-and-forth in the soybean market amid weather uncertainty in Argentina. Traders will decide how they want to be positioned ahead of the weekend based largely on midday weather updates.

* Feedlot numbers continue to tighten relative to year-ago. USDA's data is expected to show On Feed at 95.6%, Placements at 104.1% and Marketings at 93.2% of year-ago levels. It's not a matter of if On Feed numbers are below year-ago, but by how much. The key to the "read" from the report will very likely come from the Placements category. The pre-report guess range is over 12 percentage points, meaning someone will be surprised. Those looking for heavy placements point to drought forcing animals off pastures and into feedlots. Those looking for lighter placements argue tight calf supplies limited the amount of movement into feedlots last month.

The long and short of it: Even if the Placements number is on the high side of expectations, the outlook for cattle is bullish given tightening supplies.


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