Views on commodities and energy
Soybeans stay in the spotlight as China buys
Every day last week, the U.S. Department of Agriculture confirmed that China, the world’s top soy buyer, made big purchases of soybeans — 896,000 tonnes in all, or some 15 ocean cargoes for delivery from September onward.
“The big story has been the Chinese and their drumbeat of buying,” said Rich Feltes, senior vice president of MF Global Research.
The United States supplies 45 percent of the world’s soybean exports, followed by Brazil and Argentina. The weakness in the dollar and last week’s drop in prices made U.S. soybeans an attractive buy for China. U.S. cash soybeans are cheaper than Brazilian soy for loadings all the way through February.
The China National Grain and Oils Information Center, a think-tank based in Beijing, said on Friday the country would likely continue its brisk import pace. Traders and analysts will be watching for signs of new Chinese demand, such as rising cash markets at export points such as New Orleans.
“Tight farmer holding, hand-to-mouth users that are coming to the trough, a very tight old-crop carry-over situation, and this record pace of PRC buying of new-crop are all converging as we undertake this transition to new crop,” Feltes said.
The marketing year for U.S. soybeans ends in about a week on Aug. 31. USDA has already forecast end-season stocks on hand of soybeans to shrink to a 32-year low of 110 million bushels. For traders, that means a tricky tug of war will continue for several more weeks as exporters battle domestic soybean processors for scarce remaining supplies. The U.S. soy harvest will be late this autumn given the immaturity of the crop.
“I’m looking for prices to bounce (this) week seasonally. We seem to get a rally from August into September” amid the transition from old- to new-crop soy supplies, said veteran oilseed analyst Anne Frick of Prudential Bache Commodities.
HUGE US CORN/SOY HARVESTS LIKELY, BUT GROWTH LAGS
Tight stocks mean soy will remain the leader at the Chicago Board of Trade grain complex. But crop scouts on an annual U.S. crop tour last week underscored both the current immaturity of corn and soybeans but also the clear potential for big yields. Farm markets newsletter Pro Farmer, the tour’s organizer, forecast the American corn harvest at 12.807 billion bushels with an average yield of 160.1 bushels per acre.
That was above USDA’s forecast as of Aug. 1 for 12.761 billion bushels and 159.5 bpa yield — already ranking as the second-largest U.S. corn crop in history. The group also pegged soybean production at 3.150 billion bushels with an average yield of 41.0 bpa. That compared with USDA’s outlook earlier this month for a crop of 3.199 billion bushels at a yield of 41.7 bpa — the largest on record.
Analysts were not surprised by the Pro Farmer numbers, but said the lagging maturities of both crops highlighted the need for a warm September to ripen yields, for beans in particular.
“It’s going to be sensitive here until you know whether you get an early frost,” analyst Dan Cekander at Newedge USA said.
The U.S. Census Bureau will issue July soybean crush data on Thursday, which should confirm the struggle going in the U.S. cash markets to secure quick-delivery soybeans. Traders expect the crush — which measures the amount of soymeal (a livestock feed) and soyoil produced as well as soybeans crushed — to be 10 million to 15 million bushels below July 2008 when processors crushed 139.3 million bushels. This year, many processors extended their plant downtime maintenance in July due to both weaker profit margins and the unwillingness to outbid exporters for spot soybeans.
CBOT September soybeans closed Friday at $10.23 a bushel — just 1-1/2 cent lower on the week, rebounding from a mid-week sell-off. Corn tread despite the outlook for a bumper crop, ending the week nearly unchanged at $3.21-3/4. Wheat meanwhile is hovering at eight-month lows as world supplies build. September fell 4 percent to $4.60-1/4.
PHOTO: Iowa soybean field in mid-August taken by Christine Stebbins