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Morning markets: Soybeans ease as investors await confirmation of China orders

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So China is rumoured to have bought a stack more US soybeans.

 

But is the speculation true?

 

Investors will be watching out for any US Department of Agriculture alert of US soybean sales for export, after the reports that Chinese buyers booked at least 20 cargos, or around 1.2m tonnes, apparently encouraged by an allowance of imports free of retaliatory tariffs.

 

ADM Investor Services, noting talk that “the Chinese government has given new waivers to several domestic state and private companies” on these levies, added that “the companies received waivers for between 2.0m-3.0m tonnes”.

 

Goodwill or good deal?

According to Benson Quinn Commodities a “total of 5m-6m tonnes are to be exempted as a ‘goodwill’ gesture” by China, ahead of fresh talks with the US next month over a trade deal.

 

That said, “’goodwill’ or ‘good deal’, I’ll leave that up to you to discern,” with US soybean exports “currently cheapest on world markets.

 

“Recent purchases of US soy has suddenly turned Chinese crush margins positive,” the broker said, quoting prices of $335.30 a tonne for US Gulf soybeans, $362.80 a tonne for Brazilian ones, and $349.93 a tonne for Argentine supplies.

 

August import breakdown

Data overnight also highlighted renewed popularity in US soybeans in China, showing imports of 1.68m tonnes last month from that origin, up 533% year on year.

 

OK, the total for the first eight months of 2018, at 8.42m tonnes, remained down 20% year on year, and Brazil remains by far the top origin, at 6.68m tonnes for August alone (although that did represent a 16% decline).

 

For January-to-August, China has imported 40.4m tonnes from Brazil, flat year on year.

 

Still, there is hope of China meeting its commitments, said Benson Quinn Commodities, reminding of “talk, back in December at the G20 meet in Argentina, China would source up to 20m tonnes of US supply”.

 

Softer prices

But without confirmation of latest purchases, and with investors having been burnt before in recent months getting too excited on US-China trade talk, soybeans struggled nonetheless in early trading.

 

Chicago soybean futures for November stood down 0.1% at $8.93 ¾ a bushel for November as of 10:00 UK time (04:00 Chicago time).

 

It was also little helped by a further retreat in soyoil, which shed 0.4% to 29.20 cents a pound for December delivery, not having given back most of gains made this month on factors such as the oil price spike.

 

In fact, Brent crude stood down 1.7% at $62.05 a barrel, down 13.8% from its high early last week following the drone strikes on Saudi Arabia.

 

Palm oil for December managed to find its footing after a week of precipitous decline, adding 0.1% to 2,144 ringgit a tonne in Kuala Lumpur, despite further poor data on Malaysian exports.

 

Amspec Agri estimated these down 19.7% month on month for the first 25 days of September, compared with a figure of 10.8% decline as of September 20.

 

‘Colder temperatures’

Back in Chicago, corn futures fared better, adding 0.4% to $3.76 ¼ a bushel for December, retaining a knack for diverging from soybeans which has spurred talk of spreading between the two pits.

 

Frost ideas remain in view, with ADM Investor Services noting the potential for concerns given an official US forecast “for October 1-7 that brings in some colder temperatures for the Dakotas and the northern half of Minnesota”.

 

Benson Quinn Commodities said that the greater risk was in Canada, although noted that Tuesday’s mid-day GFS models did “run colder for a greater area.

 

“If they would verify, more of the northern US crop area could be impacted.”

 

‘Haven’t had the growing units’

This, of course, when after a late sowing season and a cool summer, “across the northern tier of the Corn Belt, they just haven’t had the growing units this year”, AccuWeather senior meteorologist Jason Nicholls said.

 

“So that brings the question: Is most of the crop going to make it to the finish line there? And how much of it?

 

“While most of it will, a small percentage in the far north west part of the Corn Belt may not,” Mr Nicholls said, even though saying “it’s not going to be cold enough for a widespread killing frost in most northwest areas” for now.

 

“It will be cool enough that the mean temperature will be in the 40s and low 50s Fahrneheit,” and there “isn’t much if any growth if you get below 50”.

 

‘Persistent wet weather’

Chicago soft red winter wheat, by contrast, eased by 0.1% to $4.81 ¼ a bushel for December, despite the continued strength in Minneapolis spring wheat (of because of it, some believe, seeing long Minneapolis short Chicago as a feature).

 

The Minneapolis December lot added 0.4% to $5.46 ½ a bushel, cementing its place above the 100-day moving average regained in the last session, and taking gains this month above 10%.

 

As Agritel noted, “harvesting operations in North Dakota have been penalised by abundant rainfalls with quality degradations”, and in other US states and parts of Canada too.

 

Terry Reilly noted “concern over the unharvested spring wheat across the northern Great Plains where persistent wet weather hurt quality”.

 

‘Severe quality downgrades’

It was a factor underlined by the North Dakota Wheat Commission which reported that some US spring wheat areas received “4-5 inches or more” of rain over the weekend, further hampering harvest and raising quality worries.

 

“At this point, some of the wheat may not be harvested due to inability to access fields and severe quality downgrades.

 

“Quality on the last portion of the harvest has obviously been impacted greatly by the weather conditions.”

 

Indeed, some growers “are struggling with issues of lower falling number values this year” on their crops, with the commission noting that “a larger-than-normal portion of the crop has falling numbers below 300 seconds with some reports below 200 or lower”.

 

By comparison, the average falling number for the 2019 harvest of far-lower-grade soft red winter wheat is 285 seconds, according to US Wheat Associates, which pegs the 2018 number for hard red spring at 414 seconds.

 

Gasc tender

On the positive side for prices, there remain some worries over dryness hits to crops in Australia, and for some northern hemisphere areas attempting winter wheat sowings.

 

Furthermore, on the demand side, Egypt issued a fresh tender.

 

“The competition from Black Sea origins remains strong even if the availabilities are decreasing in this region in view of the strong export activity since the harvest,” said Agritel.

 

Still, US winter wheat sowings have progressed more rapidly than had been expected, USDA data late on Monday showed.

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