Soybeans: China auction unsuccessful
Jul 30, 2009 2:22 PM, By Ray Nabors, Heartland Ag Network
China attempted to auction 500,000 tons of soybeans this week. The idea is to sell soybeans out of stored reserves at more than the market price. They were unsuccessful and received no bids on the beans.
The attempted sale indicates that China has all the stored soybeans they need and export demand will decrease. However, China bought 150,000 tons at the end of the week.
China imported nearly 5 million tons of soybeans in July.
The Chinese stock market dropped 5.5 percent this week.
India has stopped soy meal exports and has imported soy oil.
Brazil planting intentions report indicates 4 percent more soybeans planted this year. Argentina has similar planting intentions. The government in Argentina is considering a reduction in soybean export taxes as an incentive to increase planting.
Cool moist weather is favorable for production and those conditions persist in the U.S. Corn Belt.
Soybean crush above 140,000 bushels exceeded market anticipation. Soy meal sales were over 400,000 tons and 20 percent above anticipations for the week. Export inspections over 13.5 million tons were above market expectations. Only 20 percent of soybeans are setting pods, the average is over 36 percent. This crop ranks among the latest on record.
Export sales for the week at nearly 955,000 tons were twice market expectations.
Corn
Corn Belt weather continues to be production favorable when the price of pork is dropping. Cattle and hog herd sizes are spiraling down. The number of cattle and hogs placed on feed is declining.
Reduced feed use has more effect on corn prices than ethanol and food prices put together.
Crop condition ratings were reduced 1 percent to 70 percent, which is much higher than average.
Ethanol prices increased 1.5 cents to $1.61 as oil prices turned up.
China plans to sell 2 million tons of reserve corn supplies.
Corn yield potential in the southern states is dropping. The acres planted and yield potential fall under the radar for traders. USDA will revise acre estimates in August and give a more accurate measure. Corn acre estimates are expected to drop.
If yields are high, carryover supplies will still depress prices if acres are reduced by 2 million.
Corn export inspections over 39 million bushels exceed market expectations.
Corn export sales of 1.25 million tons were 25 percent over market expectations.
Wheat
Egypt exported wheat previously imported from Ukraine and Australia because it was not suitable for human consumption.
Argentina reports wheat plantings near 5 million acres. That will be the lowest planting on record. India has placed a ban on wheat exports.
Spring wheat conditions ratings reached 86 percent good to excellent, far exceeding the 64 percent average. Winter wheat harvest and excellent growing conditions for North American spring wheat put pressure on prices. Large world carryover supplies and slow exports pressure wheat prices. Export inspections near 14 million bushels were below market expectations. Export sales of 575,000 tons met market expectations.
Rice
Long grain rice production potential in the United States is supporting prices. Wheat prices heavily influence rice markets because of the substitution factor. Asia and Africa switch to whichever grain presents the best perceived value. Wheat is abundant and rice will move lower if wheat prices drop.
Thailand has large supplies of rice, but the government limited exports in light of reduced production in the United States. Medium grain rice production increased in the United States but those acres came from long grain rice fields. Long grain rice supplies may become tight this winter.
Fundamentally, current supplies of long grain rice are below demand. Asian markets are unusually quiet waiting on more business or upcoming harvest. Jordan, Guatemala and Arabia bought 9,000 tons of the 24,700 tons sold this week. Shipments of 35,900 tons of long grain milled rice were supportive of higher prices. Canada, Mexico, Costa Rica and Guatemala were the major destinations. Thailand rice is $585 per ton and Vietnamese rice $405 per ton. Thailand government support programs limit their exporters ability to compete for export business.
Cotton
All of the short-term indicators in cotton are bearish. Fundamentally current supply exceeds demand. Technical charts exhibit a negative trend. Export sales are low. The seasonal trend for cotton is for prices to pull back.
Recent weather in the Texas Plains includes rain and the forecast calls for cooler temperatures and continued rain. The monsoon rains are better than anticipated on the Indian sub-continent. World economic improvements are slow and near term demand for cotton is down.
Cotton production potential is low and that will eventually support higher prices. Cotton crop estimates are now 750,000 bales lower than USDA last reported. If the crop comes in below 12.5 million bales, it will support higher market prices. The crop is late and acres could be abandoned.
Upcoming USDA estimates will carry additional market weight. Until more crop data are available, expect erratic price moves and consolidation patterns in the market.
Cotton export numbers are weak at 41,800 bales. Most of the sales were for old crop cotton.
