Soybean sales bullish surprise
Jul 13, 2009 10:33 AM, By Ray Nabors, Contributing Writer
Soybeans
Soybean export sales of 1.25 million tons exceeded market expectations by 25 percent. That bullish surprise stopped trader selling and initiated buying. China bought the majority of our soybean exports.
Rumors of Chinese selling stored soybeans were also wrong. China revised estimates of July soybean imports upward. The new estimate of 4.5 million tons exceeds the previous estimate of 3.5 million tons by 750,000 tons in just one month. Export inspections were bullish, over 14 million bushels.
Ending supply stock estimates will be reduced. Tighter supplies will increase prices and any demand increase will push prices even higher.
Weakness in world economies can exert a bearish influence on soybean prices, but demand is steady to increasing. Europe plans to place a 12 percent import tax on bio-diesel. That may limit soy-oil exports and decrease demand. Europe imports 80 percent of its biodiesel supplies.
The United States soybean crop is 96 percent planted and 14 percent of beans are blooming. The only biological resistance factors are stink bugs, bean leaf beetles and Asian rust. These are increasing but do not threaten yield potential at this time.
Weather remains favorable for production, but increased production potential may already be priced into this market. Markets were surprised to find soybeans oversold. Expect prices to improve. If weather becomes hot and dry, another weather premium may push prices upward.
Corn
Traders are expecting corn supplies to increase 500 million bushels in the United States. In light of favorable weather, yield estimates may increase, but traders expect that to be a small factor. Any weather premium is already factored into current prices.
Decreased feed grain use is expected to reduce demand. Hog herds continue to decline in America and Asia.
Export sales were only slightly above the 1 million ton estimate at 1.164 million. Export inspections of 31 million bushels were much lower than markets anticipated.
At this time only 8 percent of corn is silking. That is half the 16 percent average. Much of the Corn Belt has not started pollination and, therefore, is vulnerable to hot dry weather. Temperatures over 90 degrees reduce pollination and yield. This phenomenon has already reduced yield potential for some corn in the South and Delta.
Buy contracts and sell contracts have been nearly equal. Corn prices made a market low for the year before prices turned upward. Corn was extremely oversold. Any factor that reduces yields or increases demand will move corn prices upward.
Current carryover supply estimates are near 1 billion bushels. That is the comfort zone for supply. If supplies are below that billion bushel mark, prices will rise significantly. Any amount much larger than a billion bushels could cause prices to test the current market low.
Most of the current bad news is probably factored into this market. Prices are more likely to increase than decrease.
Wheat
Speculators were on the sell side of the wheat market. Prices moved low enough to stimulate demand. Buyers and sellers offset each other, giving little indication of market direction.
Export sales hit 584,000 tons. The highest market estimate was 400,000. Wheat exports were bullishly above market anticipations by 200,000 tons.
Any increase in supply estimates will likely be small. Large world supply and limited world production potential are factored into current prices. Dollar relative values are lower, making our wheat more competitive on world markets.
Harvest pressure remains a factor and current yields exceed earlier estimates somewhat.
Wheat is oversold. Trader liquidation of sell contracts (short side of the market) is supporting prices.
Rice
Vietnam is selling rice in large quantities. Thailand is beginning to sell rice but not yet at the levels offered out of Vietnam. United States rice exports increased 16 percent in one week, approaching 91,000 tons. Most of it went to Mexico and Central America.
Lower dollar values help United States rice to compete on world markets.
Shipping cost is another major factor. It is difficult for importing nations in Asia and Africa to justify shipping from America when Southeast Asia is closer and less expensive.
Rice production potential in the United States is greatly reduced. Fewer acres were planted than anticipated and yields have been adversely affected by weather as well. This lower production potential has already been factored into current market prices. A large price move will be unlikely without fresh news.
If supplies from Southeast Asia are exhausted or exports are intentionally curtailed by the government of Vietnam and Thailand, then prices will rise. That could reduce supplies here in the United States and cause prices to increase sharply.
Without additional news prices are likely to stay within a trading range and move laterally.
Cotton
Export sales of cotton were anemic at near 80,000 bales. The lowest market estimates were 100,000 with the highest at 150,000 bales.
China has enough cotton reserves and is not expected to resume cotton imports in the near future.
Reduced production in the United States and Asia is already factored into market prices. Improving weather in Texas will increase production if it continues. The problem remains large carryover supplies from two years of bumper crops followed by weaker world economy. Pent up demand is on the horizon but dependant on improving economic conditions.
Chinese and American cotton carryover supplies are dropping. Cotton carryover estimates are below average use for 2010. It is not a question if cotton prices will rise; it is a question of when. Any economic improvement will stimulate a price increase.
e-mail: heartland.agriculture@yahoo.com
