Effects of Chinese Tariffs on Soybean Exports
Apr 05, 2018
Good Morning! From Allendale, Inc. with the early morning commentary for April 5, 2018.
Grain markets will be influenced by weather, trade tariffs, political actions and money flow over the next several months. Producers will be trying to make marketing decisions as they evaluate their risk management plan and/or profit opportunities. Contact your Allendale representative to assist you working through your plan.
Effects of Chinese tariffs on soybeans: Rich Nelson, Allendale’s Chief Strategist says, USDA estimates total world demand for soybeans of 150.6 million tonnes. Of that, they estimate Brazil will export 70.5 mmt, Argentina 6.8 mmt, and Paraguay 5.8 mmt. They currently see the US at 56.2. China will have a hard time not buying US product with their 97 mmt attempted purchase this year. Additionally, since the US is 37% of all world exports you could argue any lost sales to Brazil into China will be made up for elsewhere.
Cui Tiankai, China's ambassador to the United States, held an hour-long meeting at the U.S. State Department in Washington on Wednesday with acting Secretary of State John Sullivan. "Negotiation would still be our preference, but it takes two to tango. We will see what the U.S. will do," the ambassador said afterward. (Reuters)
Trade is looking for large corn sales on the weekly export sales report. Estimates for 2017/18 marketing year are: corn 1,000,000 to 1,300,000 tonnes, soybeans 600,000 to 900,000 tonnes, soymeal 150,000 to 300,000 tonnes, soyoil 10,000 to 35,000 tonnes and wheat 200,000 to 500,000 tonnes.
Evening weather GFS models decreased the precipitation in week 2 across central and western portions of the Corn Belt and central and northeastern portions of the Northern Plains.
USDA April Supply and Demand report will be released on Tuesday at 11:00 am CST. Allendale’s estimates are for an increase in corn, soybean and wheat ending stocks. In corn it is expected that USDA will lower feed/residual. Brazil corn production estimate is at 93 mmt and Argentina at 36.0 mmt. In soybeans they could lower US exports and seed/residual. Brazil soybean production estimate is 116.0 mmt. Argentina 42.5 mmt.
New crop numbers will be added by USDA until the May Supply and Demand report.
Funds were estimated to have been net sellers of 30,000 corn contracts, 21,500 soybeans, and 5,000 wheat contracts on Wednesday.
Brazilian soybean harvest is moving along at 72% complete versus average of 73% and last year’s 76% complete at this time. First crop corn harvest 60% done versus 58% average.
Weekly ethanol production last week was 1.038 million barrels per day, slightly less than previous week. However, it is positive due to its 1.9% increase from last year. Current ethanol production pace is 2.2% over last year just below the USDA’s target of 2.6%.
Cash cattle trade in the south was mostly 116 to 118 this week compared to 120.90 last week. The futures are still at a discount and currently would suggest minimal deliveries on Monday, the first notice day.
April live cattle options last trading day is Friday.
Live cattle futures reversed the slide on Wednesday by closing near limit up. Chart watchers are pointing out the outside day reversal pattern in the June contract. Resistance comes in at 107.00 and support is contract lows at 96.40.
Chinese hog prices fall to levels not seen since 2010 while their profit margins fall deep in the red. China's state planner said it would pay close attention to pork prices after the average pig-to-grain price ratio fell into a warning zone.
June lean hog futures put in a reversal on Wednesday by making new contract lows and closing higher. It may not be enough to call a seasonal low at this time. Chart resistance crosses near the 20-day average at 76.30. Support is yesterday’s low at 70.25.
Dressed beef values were lower with choice down 1.51 and select down 3.15. The CME Feeder Index is 134.50. Pork cutout value is down 1.07.
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