Demand For State-Owned Chinese Soybeans Dramatically Slows

October 25, 2012 01:07 AM

What Traders are Talking About:

* Chinese soy auction demand wanes. After consistently selling all of the soybeans it put up for sale at its biweekly auctions, the Chinese government sold only around 10% of available supplies overnight. Chinese soy processors purchased only 39,189 MT of state-owned soybeans out of 398,025 MT put up for auction. The average sale price of 4,527 yuan ($718) per ton is roughly the same as that of imported soybeans, causing importers to shy away from the older (2010-crop) state-owned reserves.

The long and short of it: As long as state-owned soybeans are priced in line with imported supplies, Chinese soy processors will favor the imported beans. If soybean futures rally sharply and global prices soar, state-owned soybeans would be favored again.

* Fed keeps foot on the gas pedal. As widely expected, the Fed will keep interest rates exceptionally low and will continue its aggressive bond-buying program as it looks to boost economic activity. While the Fed acknowledged the economy is strengthening, it sees the need for help to maintain and build economic growth. The weak labor market remains the Fed's primary concern, while inflation is not a worry. Many investors feel the Fed and the European Central Bank are all-in, meaning they are committed to do whatever is necessary to keep their economies from faltering.

The long and short of it: Green (the printing of money) means go for commodities. The Fed's aggressive bond-buying program is supportive for commodities long-term.

* Ukraine wheat export ban still expected. After Ukraine's ag minister confirmed yesterday it would ban wheat exports starting Nov. 15, a spokesperson for the country's prime minister said no "official" announcement had yet been made. This, however, seems to be just a matter of when the "official" announcement is made.

The long and short of it: As is often the case in former Soviet countries, there are many voices that are "fighting" to be the one to make an announcement. I fully expect the wheat export ban to be in place as of Nov. 15.



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