Commentary:
USDA’s daily export sales reporting service announced private exporters sold 264,000 MT of soybeans to China and another 252,000 MT of soybeans for delivery to unknow destinations, with both for 2020-21 delivery. Unknown in the trade is C-H-I-N-A. This follows yesterday’s sale of 120K tons of soybeans to Egypt. Two consecutive sales in a row to start the month. This follows a flurry of purchases by China for August and September. U.S. soybean export sales for the year to date, which
total 1.401 billion bushels, or 66% of USDA’s target for the year that will end next August 31. That’s an unprecedented total of sales for this early date, with China accounting for 640 million bushels of outstanding sales on the books as of September 24th. Sales to all destinations for the marketing year to date exceed the seasonal pace needed to hit USDA’s target by 380 million
bushels, up from 350 million the previous week. This will put pressure on USDA to increase its export target next week on October 9th, although there is still legitimate debate about final shipments, with some evidence that China is merely front-loading purchases, and then cancelling later should Brazil grow a bumper crop.
Wednesday’s on farm stocks report revealed 255 million bushels less of corn from the average trade guess, while beans came in 50 bushels lighter. Beans were 30 cents higher post report with corn up 15 cents. This raised questions regarding the balance sheet as it relates to ending stocks. Lower yields could push bean ending stocks under 300 million while corn could be below 2 billion bushels. How the USDA sees future demand will be key. In my view, the trade will have one eye on this report and the other eye on the increasing chance of LaNina developing in South America in October. In the central growing areas of Brazil, daytime high temperatures for the past week are pushing over 105°F in Mato Grosso, their largest growing area. These readings are expected to continue over the coming week. The current dry season in Brazil has yielded no rain and forecasters are saying that it could be the driest stretch in 40 years. Some of the best soybean yields come from mid-October planting, so that’s not really an issue yet. Worries will escalate if planting gets pushed back to late October or later. The delayed planting is already promising to delay the start of Brazil’s export season, extending the U.S. soybean export season in the process. The 2021 safrinha corn crop also faces greater risks. Later planting means a later harvest, which means delayed planting of the safrinha corn crop. That crop needs to be planted by the first of March to assure it can make yield before the dry season starts. It will be a smaller window this year.
Trade Ideas
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