Brazilian soy is on everyone's lips – 04/02/2019

Soybean futures are operating in negative territory in Chicago after peaking in seven months. Wheat and corn also on negative ground. Small variations for the three cultures.

Wall Street Jornal said US Treasury Secretary Steven Mnuchin had discussed the removal of some or all of the tariffs on imports of Chinese products and suggested a reduction in tariffs during negotiations scheduled for Jan. 30 . However, the media themselves warned that the commercial representative, Robert Lighthizer, had opposed this idea and that the proposal had not yet been presented to Donald Trump. Lightizer, the trade representative, proposed that the next meeting between the two countries be held in China in mid-February. Neither party discussed the removal of current tariffs. It seems like only certain government organizations will do the shopping, limiting the general volume until the tariff is deactivated. Once clarified, the number of 5 mtm could not hold the attention of the bulls. It has already acquired 1 million tons Friday and, in the best of cases, without China, the United States can ship a maximum of 1820 mbu on 18/19. It is with a good recovery of the Chinese demand, but with a privileged origin like that of South America. There is a good chance that sales to destinations other than China will be between 1470 and 1620 mb on 18/19.

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China has already pledged 128 billion US dollars to the US, of which 10 percent has already been shipped. 5 million mtm or 184 additional mbu were sold to China (which have not yet reached the level of export sales). Another similar package was announced on Friday. In the best case, according to what we have seen and heard today for 2018, there is a program of 2115 mbu in 2018/19. The optimistic mid-term scenario is a 1923 mbu program. A conservative program would be 1781 mbu. A skeptical estimate would be 1653 mbu. It leaves the surplus 18/19 within a range of 710 to 1170 mbu.

A surplus of 710 mbu would generate the second highest surplus utilization rate of the last 20 years. A surplus of 1170 mbu would be, by far, the most bearish excess use index in history.

The South American division of INTL FCStone has published its estimate update for Brazil soybean crop, reducing it by 4 mt compared to last month at 112.2 mtm. Informa updated its soybean estimate for Brazil to 117.5 t, a reduction of 1.7 t from its previous estimate. The USDA will update its estimate on February 8th. The last estimate was 122 mtm. In Brazil, Celeres lowered its soybean crop forecast by nearly 5 million tonnes on Wednesday to 117.20 million tonnes. For its part, Thomson Reuters Agriculture Research lowered its forecast by 2% to 118 million tonnes.

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The Brazilian soybean crop grew about 20% this week compared with 12% last year. Brazil indicates that its soybean exports increased by 56% in January compared to last year, with China accounting for 95% of its sales. According to ANEC, the January volume was 2.3 mt this year.

The Brazilian soybean offers presented today in China are 2% cheaper than those of the PNW and the Gulf before the 25% tariff calculation. Sea freight lost an average of $ 1 / mt last week and has been at low levels for several years. Any purchase made privately by Chinese companies of US origin is not economically viable.

The INTL FCStone office in South America has updated its estimate of maize cultivation in Brazil, with a slight increase to 92.4 t. The USDA will update its estimate on February 8th. His last calculation was 94.5 mtm.

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FOB wheat spreads have moved in favor of the United States, with the Russian currency and Russian FOB bids strengthening. Sovecon has published in its latest publication its updated estimates of the wheat harvest in Russia, estimating at 80 mtm against 77.3 mtm. Sovecon also said that snow cover and climate favor an increase in production prospects. The market continues to "feel" the signals of extraordinary US exports. Export sales will not help until it's too late.