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Would it be too clichéd to imply that news from China is both “sweet and sour” for the soy market this morning? Sorry, sometimes I just cannot help the dad jokes. Regardless, we do find both a positive and negative influence from that part if the globe this morning and for now at least the positive is winning out. Providing the sweet are cold temperatures, with potential for a frost in north east China and combined with less than ideal harvest weather here in the U.S., including the threat of Hurricane Florence expected to make landfall later this week, have lifted bean prices higher to begin this week. It does not hurt that there was another 132,000 MT of beans sold to unknown destinations either. On the sour side though is the fact China continues to buy a lot of beans but just none from us. For this new 2018/19 marketing year, Chinese booking of U.S. beans stand at a 13-year low, and they have remained virtually absent from our market now for months. That said, for the month of August, China imported 9.15 MMT of beans, which was 14% above July and 8.4% above the same month last year. Granted, there are only so many beans they can source out of South America, but with burgeoning supplies and ongoing problems with African swine fever, they may not need to be overly aggressive once they do return to the U.S. market. As a side note, Brazilian farmers are now pushing to begin a South American soybean contract that would trade on either a Brazilian or Argentine exchange specifically to better facilitate trade between South America and China. Potentially this would more accurately reflect their values sans, currency fluctuations, transportation differentials and of course, trade issues such as tariffs and trade wars.
While I suspect there is more at stake than just the soybean squabble between the U.S. and China, recent action in the Baltic Dry Index would not appear to look very promising for a boosting world export business. Since peaking in early August, this index has dropped over 16% and does not show any sign of stabilizing just yet.
I do need to make a correction from last week in that the September production and supply/demand report will be released on the 12th, not the 11th. That said, once again here are pre-report industry estimates; U.S. corn production of 14.529 billion bushels coming from a yield of 177.8 bpa. This compares with the August estimate of 14.586 and 178.4. 2017/18 ending stocks are expected to come in at 2.028 billion and 2018/19 at 1.639 billion. Last month there were pegged at 2.027 and 1.684. Soybean production is expected to total 4.649 billion bushels from a yield of 52.2 bpa. Last month’s estimate was 4.586 and 51.6. 2017/18 ending stocks are estimated to be 426 million and 2018/19 830 million, versus the previous estimates of 430 and 785. Wheat ending stocks are expected to total 941 million versus last month at 935. In the world totals, 2017/18 ending stocks for corn are expected to be 272.92 MMT, beans at 95.57 and wheat 192.24. Then for the 2018/19 crop year, the trade expects to find 154.48 MMT of corn, 107.29 MMT of beans and 257.58 MMT of wheat. As noted previously, both the corn and wheat number are price supportive while the bean figure is anything but.
Barring another unforeseen event, I would expect grain/soy markets to do little more than tread water between now and the report. While there is always a possibility that Uncle Sam will surprise us with something negative, if that is not the case I continue to believe we are poised to work higher from these price ranges. Marcos lean supportive today with metals and energies higher and the U.S. Dollar under pressure.
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