Soybean Morning Update & Commentary: Beans get some feel good demand news.
Overnight grain markets traded modestly higher led by the soybean market that is trying to bounce back from a couple of down days.
The news around soybeans yesterday was two-sided with the escalation in trade war rhetoric and the cancellation of old crop bean commitments by China weighing on the board. Meanwhile, new crop bean sales were very solid with US soybeans the cheapest in the world. This point was underlined this morning when the USDA flashed a sale of 297 tmt of new crop soybeans to unknown. The NOPA crush data added another positive demand element.
The bigger picture problem with soybean demand of course remains the absence of the Chinese market. It is reported that China has purchased 25-30 cargoes of Brazilian beans this week following a similar order last week. Brazilian bean basis surged another 15 cents to +145.
Weather is somewhat of a mixed bag. There is rain in the 5-day forecast that will be beneficial for crops but coverage is not complete the 6-10 day outlook is drier than recent runs too. August is key for soybean yield potential and the for crops poorly developed crops in the central to eastern belt, the forecast is less than ideal.
Futures open interest yesterday was -2.6k in corn, +3.3k srw, -661 hrw, +4.3k beans, +1.9k meal and -872 oil.
DTN digital/satellite crop tour yield estimates generally are below or in the cast of IL/IN/OH, well below the USDA projections. I don't know the track record of DTN/Gro crop analysis - I think next week's Pro Farmer crop tour will have a little more credibility with the trade.
KS C 144 (USDA 135)
KS B 36 (USDA 42)
MO C 138 (USDA 160)
MO B 39 (USDA 45)
NE B 56 (USDA 58)
SD C 149 (USDA 157)
SD S 40 (USDA 45)
IA C 187 (USDA 191)
IA S 53 (USDA 55)
MN C 175 (USDA 173)
MN S 44 (USDA 46)
WI C 167 (USDA 165)
WI S 46 (USDA 47)
IL C 153 (USDA 181)
IL S 46 (USDA 55)
IN C 138 (USDA 165)
IN S 46 (USDA 50)
OH C 135 (USDA 160)
OH S 42 (USDA 48)
In the news:
• China's pig herd shrank by 32.2% in July from the same month a year ago, its agriculture ministry said on Thursday, as African swine fever continues to spread through the country.
• Euronext Paris November rapeseed futures are trading +0.75 euro higher at 379.75 euros/mt
• Dalian January vegoil futures on Friday traded mixed, palm oil fell -28 yuan ending at 4,784 yuan/mt, soyoil rose +50 yuan finishing at 6,198 yuan/mt
• Dalian January soybean futures on Friday traded -24 yuan lower finishing at 3,414 yuan/mt; Jan soymeal futures fell -8 yuan ending at 2,868 yuan/mt
• U.S. President Donald Trump said on Thursday that U.S. and Chinese negotiators were holding "productive" trade talks and expected them to meet in September despite U.S. tariffs on over $125 billion worth of Chinese imports taking effect Sept 1.
• Chinese state-owned construction giant CCCC is preparing a bid to dredge Argentina's Parana River, the country's main cargo superhighway that takes soy and corn from the Pampas farm belt to the shipping lanes of the south Atlantic and the world.
• NOPA July crush came in well above expectations at 168.09 mb vs. 155.8 mb expected and 148.8 mb in June. Avg. daily rate of crush was 5.42 mb vs. 4.96 mb in June and 5.41 mb in July of 2018. Oil stocks were 1.467 bln lbs vs. 1.530 expected and 1.535 in June. This implies very strong oil demand. Oil yield 11.73 vs. 11.67 in June. Meal exports 879,319 tons vs. 554,867 in June.
Early spread action:
• Soybean bull spreads firmer.
• Board crush margins steady $1.04/bushel.
• Oil share firmer to 33.2%.
Soybean Basis: fob US Gulf soybeans are a $29/mt discount to Brazil and a $10/mt discount to Argentina fob prices.
• US CIF Gulf up 5 to +40
• Brazil fob offers up 15 to +145
• Argy fob offer up 3 to +75
• Cedar Rapids steady -50
• Decatur, IL up 3 to -15x
• Claypool, IN steady -8x
Outside markets feature the dollar challenging the recent contract high +.15 to 98.16, the 8/1 spike reversal high was 98.70. Crude oil +.39 to 54.86, DJIA +226. The Brazilian real showing stability +.28%. Malaysian palm oil closed -8 to 2,192 ringgit.