China and Europe have approved use of genetically modified crops. Europe approved imports of soybeans and China approved plantings of corn. Demand should increase.
World cotton supplies are dropping as production falls. The quality of the 2009 crop is significantly below that of the previous 2 seasons.
Soybean production is anticipated to increase 24 million tons from South America in 2010. That figure will increase world ending stocks by 30 percent. The resulting price drop is anticipated to be 12 percent as Brazilian and Argentine soybeans come to market in the spring of 2010. The South American planting is progressing well. Current estimates cannot factor in weather or biological resistance next year.
European countries are approved importation for genetically modified crops. Chinese import demand remains strong with feed mill use up 10 percent. China is buying domestic soybeans to support farmer income. This could reduce Chinese demand as they build domestic reserves. South American production potential remains bearish for prices.
Palm oil supplies are tightening. Soy oil is the best substitute for palm oil. Farmer selling has increased with rising prices and harvest. Rain has delayed harvest in Malaysia and Indonesia as well as the United States. Any pull back in palm oil prices pressures soybean prices.
Export inspections hit a new high the week before Thanksgiving 73.8 million bushels. Export inspections have been above average for 3 weeks running including 41.3 million bushels last week. Total inspections for the year exceed the 5 year average by 4 percent. Soybean export sales last week were in excess of market anticipations at 1.135 million tons. Expectations were below 700,000 tons.
Farmer selling has a negative effect on corn prices. Corn selling increases when local prices get near 4 dollars. Trader buying interest in corn has increased more than for soybeans or wheat. Technical charts started the week mixed keeping prices in a range.
Corn export sales were in excess of market expectations last week at 1.235 million tons. Shipments above 628,000 tons were also above expectations. Most of those shipments went to Japan and Mexico. Export inspections of 24 million bushels were behind USDA projections.
China is buying domestic corn to subsidize farmer income. The Chinese crop is poor. China may eventually need to buy corn for livestock feed. Chicken and Hog herds have increased substantially since last spring. Feed use is increasing in China, 10 percent above last year.
Wheat export inspections were within expectations at 393,000 tons. Total export sales of wheat are 8.5 percent behind USDA predictions. Dollar values are driving wheat markets. When the dollar value drops wheat exports increase but increased dollar values are bearish.
Black sea wheat is dropping in price. Kazakhstan Is subsidizing wheat exports to entice buyers. Transportation to the Black sea is expensive for producers. Russian wheat prices are increasing as export demand from the Black sea region increases. Winter wheat production estimates in Argentina were reduced 250,000 tons. World wheat supplies are increasing and will pressure prices. Canadian railroad workers are on strike. Since most Canadian grain moves by rail, wheat is not going to market. The strike is expected to be settled by arbitration within days.
Anticipated rice sales to India and the Philippines have not yet materialized. World supplies are tightening. The Japanese increase of rice imports for storage, the lack of rice for export from Vietnam and the holding of rice in storage by Thailand are increasing prices in Asia and the World. The Philippines has issued large tenders for rice. India is waiting for a price pull back. India will need rice imports in the near future.
The debt crisis in Dubai stalled cotton prices over the holiday weekend. Clothing sales were disappointing over the holiday weekend in the United States. However, economic growth in China and India are supportive of higher cotton prices. Trader sentiment indicates prices of 75 cents and above.
Export sales of 166,000 bales met market expectations. Total export sales for this market year remain 5 percent behind average. Deliveries of 453,388 bales were above expectations and market price bullish.
World cotton supplies expected to drop 5 percent. Chinese production is down 16 percent. India and Pakistan have increased production and plan to increase cotton exports. Near term cotton technical charts are bearish but long term fundamentals are bullish.