Headlines:
China May Have to Resume U.S. Soybean Purchases in Weeks
China may have to start buying U.S. soybeans again in coming weeks despite the trade war between the two countries as other regions cannot supply enough soybeans to meet China’s needs, Hamburg-based oilseeds analysts Oil World said on Tuesday. In July, China imposed import tariffs on a list of U.S. goods, including soybeans, as part of the trade dispute with the United States. China is the world’s largest soybean importer and has been seeking alternative supplies, especially in South America, where supplies available for export are down. “China has to resume purchases of U.S. soybeans,” Oil World said in its latest newsletter. “The South American supply shortage will make it necessary for China, in our opinion, to import 15 million tonnes of U.S. soybeans in October 2018/March 2019, even if the current trade war is not resolved.” Chinese purchases of U.S. soybeans could re-start “in coming weeks,” Oil World added. Soybeans, crushed to make cooking oil and the protein-rich animal feed ingredient soymeal, were the biggest U.S. agriculture export to China last year at a value of $12.3 billion, according to the U.S. Department of Agriculture. Oil World said with South American export supplies expected to be down sizeably from a year earlier in the next six months, China will face very tight domestic soybean supplies unless it resumes large-scale purchases of U.S. soybeans. “There is a risk that China will have to cut back its livestock production, implying higher prices on the domestic market,” it said. China is also likely to raise imports of processed soymeal as an alternative to soybeans for crushing, it said. Ironically this could mean China could still end up with U.S. soybeans that have been processed in Argentina. “The biggest increase is likely to be seen in soymeal exports from Argentina to China,” it said. “If China begins purchasing Argentine soymeal, a lack of soybean supplies in Argentina is likely to raise Argentine imports of U.S. soybeans.”
Pushing the Record on Corn Exports
Due to continued strong overseas demand, U.S. corn exports could be the second-largest ever this trade year, says USDA, pegging shipments at 61 million tonnes for 2017/2018. The record is 61.8 million tonnes in 1979/1980. “Exports by key competitors (mainly Brazil, Argentina, and, to a lesser extent, Ukraine) have been slower than anticipated,” said Foreign Agricultural Service analysts in a July World Markets and Trade report. Drought reduced Argentina’s corn supply, and high prices for corn from Ukraine deterred its sales. Soybeans have shouldered aside corn at Brazilian ports in the rush to capitalize on soybean sales to China. U.S. corn exports were far above average this spring and early summer with a large amount of corn under contract and waiting for shipment by the September 30 end of the trade year. “The strength in exports, however, is currently forecast to diminish year over year in 2018/2019, as both importing and exporting countries adjust to trade dynamics,” said the FAS. Its forecast for the new trade year is 56.5 million tonnes.
Summary:
Continuing concern about this year’s yield and a selloff in pulled corn prices. General expectations for Friday’s USDA report are for it to raise the US corn yield from their current 174bpa estimate. Estimates range from 172bpa to 178bpa. The soybean market was better after the USDA dropped crop ratings more than expected to 67% Good/Excellent from 70% last week. Headline news from Oil World saying that China will need to buy US soybeans relatively soon and help to push prices higher. Oil World says China will face a tight supply situation in from October to March and will resume US soy purchases. Profit taking at resistance took hold of Whet today with it giving up about 6 cents on the day. Harvest across northern tier states is set to accelerate this week with warm and dry conditions forecast.