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It was confirmed last Friday that indeed, Egypt had purchased wheat from the U.S., the first such transaction since May of 2017, but of the total of 470,000 MT purchased, just 60,000 will originate in this country and the lions share will be coming from Russia. I am certainly not complaining through as it could suggest we are competitive enough to look for more to come. Also supporting prices Friday and this morning was a surprise cut in the Australian crop by ABARE, slicing their estimate by 2.5 MMT from their September report to a projected crop of 16.6 MMT.
Over the weekend the Chinese government issued new “guidelines” concerning the protein content of animal feeds. There was there any mention of when this could take effect. The key word here is guideline as there is nothing that is mandatory but according to the government estimates, if these were adhered to, overall soybean consumption would be reduced 14 MMT and soy meal consumption 11 MMT. A soybean trader who wished to remain anonymous commented that this really meant little seeing that there was nothing enforceable and that realistically, soy and meal usage is already being reduced but because of higher prices relative to substitute proteins. Funny how often economics encourage change far more quickly than government mandates.
While it comes as no surprise, over the weekend the people of Brazil elected the free market advocate Jair Bolsonaro as their new President as a repudiation of the corruption that has plagued that nation for decades as well as for the severe recession they have been suffering through. As we commented last week, Mr. Bolsonaro is an advocate of loosening environmental laws which will likely translate into more expansion for commercial agriculture. Needless to say, if successful that translates into greater competition of U.S. ag.
Many are breathing a sign of relief this morning as equity markets are quite stable. U.S. markets have basically returned to an unchanged position for the year but appear to remain troubled not so much by earnings reports as by forward guidance for the months ahead. Macros lean toward a negative influence for grain/soy as we have energies and metals soft and the dollar higher.
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