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South America pressuring soybeans

Soybeans: Bearish news: The flow of soybeans out of South America is pressuring soybean prices. Brazil’s harvest is one-third complete. Chinese soybean prices are volatile but the overall trend is down. Chinese market prices dropped 24 cents in one day. South America is expected to produce 120 million tons of soybeans.

World carryover could easily reach 60 million tons. The United States is expected to carry over nearly 200 million bushels. Export sales last week of 370,000 tons were below market expectations. Export inspections of 31 million bushels were below market expectations.

Brazil has exported a record 664,000 tons of soybeans. One-third of Brazil’s crop is harvested. Their production estimate is 67.5 million tons. That is a 1.5 million ton increase. World soybean demand is switching to Brazil and Argentina. India’s soy-meal imports are down 42 percent this crop year.

Bullish news: Chinese vegetable oil consumption doubled during the decade of the nineties. It has doubled again since the year 2000. Biodiesel production in the United States and the world is increasing. Argentina has increased biodiesel production.

Chinese consumption of soy oil is double the consumption of the United States. World vegetable oil supplies may drop 1.8 million tons. China has decided to increase storage capacity holding more soybeans in reserve. Chinese soybean production is expected to drop with fewer acres planted.

Broiler production in the United States increased 1 percent. There were 167 million chicks placed on soy meal based feed this past week. USDA is expected to reduce U.S. ending stock estimates by 5 million bushels due to increased demand.

Corn: Bearish news: Argentina and Brazil are both reporting record corn production. Argentina now estimates corn production to reach nearly 20 million tons. Brazil production estimates increased again to 51.4 million tons. The corn export pipeline is nearly full. Export sales are for delivery late this year indicating customers have enough corn for this year.

Corn ending stock estimates in the United States are expected to stay near 1.7 billion bushels. Trader buying in corn has slowed as the number of buy contracts is getting closer to the number of sell contracts. Traders are positioning toward sell side driving corn prices lower.

Bullish news: Farmer selling in corn has remained slow. This action has helped support prices. Higher energy prices are supporting ethanol prices. Ethanol consumption in South America is increasing. Planting intensions in the south are switching from corn to cotton.

Export inspections reached 34 million bushels reaching market anticipation. Weekly export sales last week were above market expectations over 850,000 tons.

Wheat: Bearish news: Australia increased wheat production estimates 1 percent. India has a bumper crop and 18 million tons of wheat. That is 10 million tons above their target storage reserve. India is expected to begin exporting wheat.

Wheat is less expensive in the Black Sea region of Russia and in Europe than in the United States. Wheat in Europe, Kazakhstan and Russia is not only less expensive but closer to Asian and African markets reducing freight cost to those countries.

Expect price erosion in wheat markets as traders continue selling. The lack of demand for U.S. wheat reflects high prices compared to other suppliers. Exports were disappointing at 104,000 tons.

Bullish news: Export inspections were nearly 20 million bushels exceeding the market expectations.

Rice: Bearish news: The Philippines is expected to buy an additional 800,000 tons of rice. Unfortunately, most if not all of the business will go to Vietnam if not Thailand. Vietnam has been selling below world market prices to generate cash income. Fundamentally, there is too much lower priced rice in Asia for United States rice to glean market share.

Markets now anticipate a large increase of U.S. rice acres next year. This is price bearish in the short term. Unless Asian rice supplies are reduced by increased demand or lower production, prices will continue to slide. Current price predictions include projections below $12.

Bullish news: Weekly export shipments of 112,000 tons were bullish but that is rice already sold. Thailand is holding rice in storage until Vietnam sells out. Thailand is refusing to undersell Vietnam.

Cotton: Bullish news: Cotton deliveries exceed half a million bales. Traders are questioning ending stock estimate in China and India as well the United States. It is anticipated that USDA world supply estimates maybe lowered again.

Increasing stock market prices are supporting cotton. World economic growth is slow but positive. Traders are positioning to the long side (buying) of cotton markets.

Bearish news: The current cotton price correction is probably temporary. Higher prices have limited exports. Export sales this past week of 111,000 bales were the lowest this year. Despite improved economic news, cotton exports were below market expectations.

Cotton planting intensions have increased about a million acres. At least some of that change will be coming out of corn. Brazil placed a tariff on U.S. cotton that is estimated to cost $590 million. The tariff affects 120 products including cars, food, medicine and cosmetics.


TAGS: Outlook
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