Certain phrases have always struck fear and dread into the hearts of just about every person. “I need to see you in my office” or “You just wait until your father hears about this,” but it would appear we can now add another to this list; “market conditions.” Granted, the length of the official Phase One signing ceremony tested even the most patient of individual, (I am pretty sure I saw Henry Kissinger nodding off a few times) but after around 45 minutes, we finally got to the meat and potatoes, or should I say pork and beans, of the agreement and received additional confirmation from China, that they intend to purchase $40 billion worth of US ag goods annually over the next two years along with assorted other US products totaling up to $200 billion. It is not that this was new information but hearing it from the horse’s mouth, so to speak was a positive step. But then they uttered those other fateful words, “market conditions.” Does this mean they will only live up to the agreement if market conditions dictate it will be to their advantage? It is interesting to point out that the equity markets largely ignored those final words (maybe they are less cynical that commodity people) and the raced into new record highs, but not so in ag commodities and particularly the soybean market. I doubt the ink had even dried on the official document when the bean market turned lower and pushed back below support that has held the low end of that market for weeks. While I suspect this just confirms we have moved into an overdue corrective phase for this market, it is also a classic example of, buy the rumor, sell the fact trade action. It also appears to be telling us that the promised return of Chinese business has a price limit and until there is further confirmation of more or another element to spark buying interest, that limit is in the 9.50/9.60 range for nearby beans.
With Phase One now in the history books, grain and soy markets can move on to focus on other things, of which there is not a lot just yet. That said, we do have the weekly export sales report to look over this morning and the numbers were generally positive. For the week ending January 9th, we sold 784,800 MT or 30.9 million bushels of corn. There is no sense even comparing this to a week ago as we were still in the throes of holiday trade, but this figure was above the upper end of expectations. Japan was the top purchaser with 373.1k MT, followed by Colombia at 168.2k and then Mexico rounding out the top three with 116.4k. There was also a sale of 207k MT to Japan for the 2020/21 crop year reported. Soybean sales rebounded to a total of 711,500 MT or 26.15 million bushels. China was the top buyer with 216,600 MT (30%), followed by the Netherlands taking 197.5k and then Egypt with 121k. I should also point out that Soy meal and cake sales recorded a marketing-year high of 375.2k MT and this morning in the daily system the USDA reported another 180k MT were sold to the Philippines. Finally, wheat sales were also solid with a total of 650,600 MT or 23.91 million bushels. Unknown destination accounted for the top spot with 130.5k MT, followed by the Philippines taking 127.9k and then Indonesia with 70.8k.
I would expect markets to soon shift focus to discussions/concerns about 2020 crops, but we may have a few weeks of corrective action to work through first.
