First, an apology.
The huge November soybean contract trading volume bar that Agrimoney’s Reuters screen showed at the close of the last session, and which the site reported in its evening market report, had shrunk into something more typical by early Friday. A huge blue pillar had turned into more of a stub.
While more than one broker had reported large algo interest in soybeans in the last session too, Chicago exchange data confirmed nothing out of the ordinary.
We regret any confusion caused. Moral – treat live Reuters trading volume data with more suspicion.
There is good news from this is for soybean bulls, in that large trading volumes often herald a change of direction, which in this case would mean a turn lower.
In fact, November soybean futures stood 0.2% higher at $9.68 a bushel as of 10:00 UK time (04:00 Chicago time) – a small gain, but potentially significant nonetheless, in that it put the contract on course for a rarely-achieved 10th successive positive close.
Whether it can keep a hold on that run, over which the contract has now gained 7.0%, may depend later on whether further talk of huge Chinese purchases of US soybeans is confirmed later in an announcement by the US Department of Agriculture through its daily alerts system.
Huge China order?
Terry Reilly at Futures International flagged one rumour that Chinese state-owned firms bought up to nine cargos of US soybeans for December and January shipment, and private buyers an additional two.
“Later in the session we heard China bought an additional 10 cargoes of US soybeans for January and possibly February shipment.”
This timing “would be unusual” given that it is a time of year when Brazilian shipments are in an upswing to its period of seasonal dominance in world trade, and the country’s farmers look unlikely to prove shy about planting the crop, when sowing windows open in earnest over the next 10 days.
“Brazil is seeing a record amount of producer sales commitment for new crop at this time of year”.
‘Brazil in the market for US soybeans’
Not that this is the only strange soybean dynamic involving Brazil which is the subject of market rumour.
Karl Setzer at AgriVisor noted talk late on Thursday “that Brazil was in the market for US soybeans for import”.
While Brazil is better known as the world’s top soybean exporter, its latest shipment programme is proving more than enthusiastic, with soybeans (as well as corn and rice) among crops that the country – temporarily - proposed ditching tariffs on for imports from non-Mercosur origins.
Mr Setzer said that “it is really not that surprising” that the country might turn to US supplies as Brazil can sell their soybeans for record values and then replenish reserves with cheaper US inventory”.
That said, “sources claim that while possible, the market is still not where it would make economic sense for Brazilian crushers,” with US values still needing to become about $0.25-a-bushel or so more competitive.
Still, although soybeans were holding their course, for other ag markets there was more of a reversal theme going on, as often happens in sessions before the weekend, and particularly long weekends, with Monday bringing the US Labor Day holiday.
Benson Quinn Commodities heralded the sessions saying that “with long holiday weekend and USDA Wasde/crop production out next Friday” it was looking for funds to “even-up positions”.
In corn, the trend was positive for prices, with the Chicago December contract bouncing 1.3% to $3.58 ¼ a bushel, to erase nearly all the losses of the last session.
‘Corn deficiency of 30m tonnes’
There remains speculation too of Chinese purchases of US corn, given estimates – some of them huge – of a vacuum created by successive Chinese production shortfalls.
“There are sources in China that claim the country will have a corn deficiency estimated at 30m tonnes this year,” Mr Setzer said.
“This has created the opinion that China’s need of commodities is more of a factor in recent purchases than [obligations under] the phase one agreement.”
China’s own corn output hopes this year are hardly being helped by the prospect of three typhoons in quick succession hitting its key north east growing area.
“Crop losses are likely to be material,” said Tobin Gorey at Commonwealth Bank of Australia.
“Those losses do not automatically translate into more corn, and feed, imports to China. Yet it is somehow difficult to think that it will not eventually add to imports.”
Wheat managed headway too, adding 0.5% to $5.55 ¾ a bushel in Chicago for December delivery, and looking for its first winning session in three.
Here too, China is a theme.
“China is expected to buy US wheat, but timing is unknown,” Mr Reilly said.
“With the political tensions between Australia and China rising, some traders believe China will turn to the US after they exhaust EU and Canadian exports.”
That said, market estimates suggest that Chinese wheat supplies are more ample than its corn ones, if potentially perhaps not all of the highest quality.
Russia is also in the spotlight, after its victory – again – in the latest tender by Egypt’s Gasc grain authority.
However, while Russia has taken 80% of Gasc trade at tender so far in 2020-21, there were some interesting signals in the latest one.
… namely the sharp price increase, of $12 a tonne excluding freight, from the previous tender, week on week, and Gasc’s purchase of only one cargo this time.
“The increase in prices has probably prompted Egypt to buy only one boat, suggesting a return to buying quickly,” Agritel said.
Sticking with the reversal theme, that reached Kuala Lumpur too, where palm oil for November fell by 1.8% to 2,838 ringgit a tonne.
This was attributed to profit-taking after a six-session winning streak which gained the contract 10.6%.
Agritel flagged pressure from “a rise in stocks in Malaysia over the month of August”, with an investor poll showing a figure of 1.79m tonnes, which would represent a 5.4% increase from July.
The poll was by Reuters, which takes us back to where we started…