CBOT Recovers at Midday Following Sell the Fact Profit Taking on China Soybean Demand

Feb 5, 12:14 pm | Mid-day Commentary | Share this:

** Confirmation that China has secured 2.6 MMTs of US soybeans with another 274,000 MTs going to an unknown destination caused profit taking on CBOT longs amid “sell the fact” trading. The bulls wanted to trim their market risk ahead of Friday’s USDA Crop report. Including Monday’s USDA sales announcement that China bought 612,000 MTs, total China soybean purchases in recent days are pegged at 3.6 MMTs. Commercial sources argue that another 500-750,000 MTs will be announced on Wednesday which means that China has virtually completed its 5 MMTs purchase program that was offered as negotiation plum to President Trump.

  Amid limited news and light volume, the grains followed the soybean market lower without any conviction. The market has clawed back some of its losses on the expectation of reduced US corn/soybean yields in Friday’s USDA report. Old vs new crop wheat spreads are gaining on tightening world supplies and rising fob values. US cash basis bids for SRW/HRW are firm.

** CBOT brokers estimate that funds have sold; 2,400 contracts of soybeans, 3,200 contracts of corn and 2,100 contracts of wheat. In soy products, funds have sold 1,400 contracts of soymeal and bought 1,900 contracts of soyoil.

 ** The Brazilian soybean export line up is record large for early February. However, most export sources argue that its based on the early maturation of the Brazilian crop. Yet, cash basis bids are weak and likely to weaken farther as the harvest advances. For most Brazilian farmers its tough to find a good cash bid for spot shipment. This is likely due to US soybeans being pushed into China which is reducing demand in Brazil. Brazil is anxious to get more sales on the books amid step Argentine discounts for LH March/April.  Argentine soybeans for April are offered $.36/Bu cheaper than the US Gulf, and $.50/Bu cheaper than Brazil!

 ** Dryness questions are starting to redevelop for portions of Eastern Europe and Western Russia. Winter crops are uncovered as prior snows have melted which raises the risk of winterkill. However, the crop is still in dormancy, but the forecasts offer continued dry weather thru February, which will make March rainfall/snows important. Remember that the 2019 winter wheat crop did not properly get established due to a lingering drought.

 ** Canada Dec 31 canola stocks were 14.6 MMTs, up 5% from last year with wheat stocks equal to last year at 23.2 MMTs. Oat stocks were down 20% at 2.9 MMTs.  The December 31st oat data was bullish with canola slightly bearish.

** Midday GFS South American Weather Discussion: The midday GFS is a tad drier with diminished rain chances across the southern 1/3 of Brazil. Northern Brazil has solid rain chances with 10-day totals of 3-7.00”. The rains should help finish off the soy crop and aid winter corn crop establishment. A drier forecast is offered for Argentina which is initially helpful to crops. No heat is expected across Argentina which will help preserve soil moisture. The Argentine corn crop is filling, and soybeans are blooming. ARC looks for the Brazilian soybean harvest to reach 25-28% through the weekend. The South American weather forecast is favorable for the next 2 weeks.

** 10 Day GFS Rainfall Forecast: 

** AgResource Market Analysis: Friday’s USDA Crop report will produce considerable market volatility with the focus on US corn/soybean yield, and 2019 winter wheat seeding. ARC looks for a positive report with the US corn yield being down 2-3 BPA and soybeans down .4-.6 BPA, while US winter wheat seeding is at a 110-year low – down 600-900,000 acres from 2018. The State of the Union address from President Trump will feature US Trade progress and a call for a new US infrastructure program. Good for raw material prices.