Imagine That, Tepid Demand For Old Chinese Soybean Stocks

August 8, 2013 01:15 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are trading 3 to 5 cents higher, soybeans are 10 to 15 cents higher and wheat futures are 1 to 4 cents higher. Ideas the downside has been overdone should be enough to maintain gains into the reopening of trade at 8:30 a.m. CT, but key will be whether the corrective buying persists or if traders view the bounce as a fresh selling opportunity. Cattle futures are expected to trade sharply higher this morning, while hogs are called higher on spillover support and firming cash fundamentals.


* Chinese soy auction attracts limited demand. China has started auctioning old soybean stocks from state reserves as it prepares for the new-crop harvest this fall. In the initial auction conducted overnight, Chinese crushers purchased only 89,928 MT of the 501,020 MT offered for sale -- 17.9%. While the avearge sale price of 3,894 yuan ($640) per MT is cheaper than imported beans, demand for this auction and upcoming auctions will likely remain light as the Chinese government is trying to move supplies from 2009 and 2010. Chinese crushers have shown a limited willingness to buy the old stocks in the past.

The long and short of it: Chinese auctions of old soybean stocks may curb soy import demand some, but this won't likely have a major impact, especially if new-crop futures continue to fall.

* Upbeat Chinese trade data, including record soy imports. China's trade surplus narrowed to $17.8 billion in July from $27.2 billion in June, according to official customs data, but the attention grabber is that exports rose 5.1% last month and imports surged 10.9%. That comes on the heels of weaker export and import numbers in June. Meanwhile, China imported a record 7.2 MMT of soybeans in July, up 3.9% from June and 22.7% more than year-ago. For the first seven months of this calendar year, Chinese soy imports of 34.7 MMT are down 0.7% from year-ago. State-run China National Grain and Oils Information Center expects Chinese soy imports to slip to 6.02 MMT in August and says they could slide to around 5 MMT in September and October as new-crop supplies become available.

The long and short of it: The Chinese trade data is getting a bullish read as it signals improved Chinese demand for raw commodities and also a pickup in demand for Chinese goods.

* Tyson to suspend purchases of cattle fed beta-agonists. Tyson Foods announced Wednesday that as of Sept. 6 it will suspend purchases of cattle fed the feed additive zilpaterol (Zilmax). Tyson said it was concerned about recent cases of cattle being delivered to its plants with difficulty walking or being unable to move. "We do not know the specific cause of these problems, but some animal health experts have suggested that the use of the feed supplement Zilmax, also known as zilpaterol is one possible cause. Our evaluation of these problems is ongoing but as an interim measure we plan to suspend our purchases of cattle that have been fed Zilmax," Tyson said in a statement. Tyson also said the ban is "not a food safety issue."

The long and short of it: Cattle futures are trading sharply higher to limit up in electronic trading on the news as traders feel this will reduce the amount of beef on the market, especially if other companies follow suit. While cattle that continue to be fed Zilmax will be purchased by other packers, traders feel this ban will reduce overall weight gains and lead to a reduction in beef production.


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