Soybeans Pulling the Plow

December 14, 2012 02:56 AM

What Traders are Talking About:

* Soybeans pulling the plow. Soybean futures are working on decent gains for the week -- if they can hold onto overnight gains -- despite sharp pressure on wheat futures and lesser pressure on corn. With wheat and corn heading south, soybeans are having to pull the load all alone, which is tough. At a minimum, soybeans need the wheat and corn markets to stop sliding if they are going to advance. But with China actively buying U.S. soybeans (1.518 MMT of confirmed purchases the past two weeks and talk they continue to shop around for more cargoes) and crushers continuing to process as many beans as they can get their hands on (NOPA crush was up 2.5% from October and up 11.3% from year-ago in November at 157.308 million bu.), the market is well supported fundamentally.

The long and short of it: Even with corn and wheat acting as an anchor, soybeans are showing good strength. If selling pressure in the corn and wheat markets eases, soybeans are poised to challenge the late-October highs.

* Well, that didn't take long. Two cargoes of Argentine corn are being detained at Chinese ports after GMO strains not approved for shipment were found in the shipments. A Chinese official says all corn shipments from Argentina will be halted until the situation is resolved. These are believed to be the first shipments of Argentine corn to China after the two countries recently finalized a phytosanitary agreement on corn trade. Meanwhile, an official with state-run stockpiler China Grain Reseves Corp. (Sinograin) says the 2012 Chinese corn wasn't nearly as big as forecast by the National Bureau of Statistics, who said production rose 15.24 MMT to 208.12 MMT this year. The Sinograin official says production was up 5.1 MMT and will leave the country at a "small deficit," meaning government stocks will have to be used to meet demand needs.

The long and short of it:

* South Korean buying spree continues. South Korean firms purchased another 324,500 MT of corn overnight, bringing total purchases this week to 630,000 MT. While most of the purchases were optional origin, the bulk of the business is expected to be sourced with South American supplies. While it's good news the price downturn has sparked fresh export demand, the U.S. is not expected to get much of the business as global end-users continue to seek alternatives to high-priced U.S. corn.

The long and short of it: Given the very sluggish U.S. corn export pace, it was surprising USDA did not lower its corn export forecast in the December Supply & Demand Report. Unless something dramatically changes, look for that adjustment to be made in upcoming reports.


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