NASHVILLE, TENN. (RFD-TV) — Recent USDA export sales data show China has been present in the U.S. market recently, but analyst Brian Hoops told RFD-TV News that the timing is a big clue.
“A lot of times during this time of the year, many years, they will step in and buy ahead of south America’s reproductive timeframe -- and that is here in the last couple of weeks of December into January, a very critical time for Argentina and Brazil’s corn and soybean crops -- they do that as a hedge to protect in case prices do move sharply higher because of the lack of rain or some supply issues. And right now, we don’t really see that as being an issue.”
China is on the hook for 12 million metric tons of U.S. soybeans through the end of this year. U.S. Trade Representative Jamieson Greer recently told lawmakers that China has until the end of the season to honor the deal. However, commodity broker Sherman Newlin told RFD-TV News that even if they make all those purchases within the promised timeframe, it will take a long time for the soybean shipments to clear ports.
“I think the disappointment in the market is not that they’re not going to buy the 12 million metric tons that they say they’re going to do, but you know, how long is it going to take to ship it? That could be another six...seven..eight months to get all that shipped out,” Newlin said. “But, also, China is auctioning off some of the reserves to make room for these beans. And those haven’t been going there as well. The most recent one, I only had them selling about one-third of what they had out there to offer. So, I think there’s some disappointment, you know, in that as well. Some of their demand could still be slowing down.”
Newlin said he will be monitoring the weather in South America in the coming days, noting their crops are coming in strong—and that could influence China’s buying decisions. The favorable weather in South America is already affecting U.S. wheat. According to Hoops, unless something happens, buyers will have many choices outside the U.S.
“It’s really going to struggle, I’m afraid. You look at what’s happening around the world. Argentina’s crop rated 88% good to excellent, one of the highest ratings ever in history. Buenos Aires grain exchange is increasing their size, the estimate of the Argentina’s crop. Russia’s increasing their size of their wheat crop. We have a lot of competition around the world here for wheat, and it’s very unlikely we’re going to be able to meet that carry.”
Hoops warned it will likely be an uphill climb this year to meet carry for corn, soybeans, and wheat.
As export sales data continue to come in from the shutdown period, they show China is about halfway to this year’s soybean goal. Trader Sam Hudson told RFD-TV News that he is holding off on his excitement until more data is released next month.
“You’re approaching kind of that 50% mark if you include all the unknown sales against that 12 million metric fund commitment,” Hudson said. “So, I really think long term -- when we look in the rear view -- this is going to matter a whole lot less than what we’ve put to it here in the short term. Partially because there’s just nothing else to talk about right now. Let’s see what our supply updates say in January. Let’s watch this demand prove itself out. Corn is obviously getting a lot of attention there, just the same. And even some unknown flash sales on corn starting to stack up and catching some attention that it could even be China there, too. So, plenty of news, I think, coming at us here in the new year.”
The next big read on crops will be the January WASDE report, scheduled for publication on January 12.
The markets are also digesting Friday’s Cattle on Feed Report for December. While it did not contain any surprises, it confirmed that cattle numbers are continuing to tighten. Hudson said that while the New World screwworm remains a threat, markets have eased significantly since the first detection in Mexico.
“I think you’re starting to take the edge off a little bit,” he said. “I think we’re coming to the realization that this wasn’t just a short-term problem, and I think that’s how it was kind of advertised coming out of the gate. The biggest problem was still all the cattle that you can’t track coming into Mexico, not necessarily just the ones from Mexico. And I think you look at the evolution of how the market could change coming out of this, how much more cattle are they going to get used to having just south of the border in general here forward?”
Earlier this month, Mexico’s Agriculture Minister said that 99.9 percent of cases in Mexico have been contained since last November. That outbreak triggered the U.S. border closure in May. To date, Mexican officials say they have spent more than $65 million fighting the parasite.
