When Will China Buy US Soybeans?
Jul 30, 2018
Good Morning! From Allendale, Inc. with the early morning commentary for July 30, 2018.
Grain and oilseed markets are adding to last week’s gains. Short covering has to be one of When Will China Buy? The key reasons for the rally as news on trade relations were limited over the weekend. News wires are reporting shutdown of some soybean processing plants in China due to soybean supplies. China is paying $47-$57 premium for S American beans vs. US beans and slowed its soy buying pace appreciable last week (2 cargoes). Could be a sign China will have to buy from US even with a tariff increase.
CFTC Commitments of Traders report showed managed money funds were light sellers in corn and soybeans while remaining net short 130,197 corn and 61,315 soybeans. However, they were net buyers of 20,385 wheat contracts pushing their net long positions to 23,942 contracts.
Friday, funds were estimated to have been net buyers of 6,500 corn, 4,000 soybeans and net sellers of 6,000 wheat.
Crop conditions report this afternoon could show improvement for corn and soybeans and lower the good/excellent in spring wheat. Disease issues in spring wheat and crop tour results could provide price support.
Falling margins for soy growers in Brazil from currency swings and rising transport costs will not derail farmers' plans to plant a record crop come September, as strong Chinese demand is expected to buoy the market, according to agribusiness analysts. (Reuters)
August options expired on Friday and the first notice day on Tuesday creates a narrow window for trade to even up. There were 360 August soybean 870 puts, a ½ cent out of the money exercised while 191 August wheat 530 calls, a ½ cent in the money abandoned.
Allendale Ag Leaders Conference showed a slightly positive outlook. Beef production was pegged at 26.993 billion lbs. That would be 3.1% over last year. However, in the Q4 outlook we expect 6.764 billion in production, 0.3% year/year. These numbers are within the trade talk, perhaps a little under for the Q4 picture.
Cash cattle trade last week was late on Friday at 112. Product closed out the week on a firm note with choice holding the 205.00 level. Packer margins remain strong as they battle look for large numbers on the horizon.
August live cattle futures should find support as they are discount to cash. First notice day is next Monday. Seasonals also point to a time where futures move to a premium to cash. October futures have important support at 108.07 and resistance at 112.25.
Managed Money funds were net buyers last week of 11,643 contracts of corn and 3,291 contracts of lean hogs, their net positions are long 48,558 live cattle and net short 3,000 lean hogs.
Lean hog futures continue to get pounded by long liquidation as trade relations with china and Mexico are unclear. Most lean hog contracts set new contract lows on Friday. Hogs are oversold and sharp rallies could occur when selling stop.
Dressed beef values were mixed with choice up .23 and select up .00. The CME Feeder Index is 149.57. Pork cutout value is up 1.20.