Neither Chinese purchases nor drought in Brazil slows soybean decline – 06/02/2019

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The purchase of 2,603 ​​MTM in China, adding 274,000 MT to unknown destinations, period 2018/19, did not provoke on the market the expected upward reaction. This purchase of 2,603 ​​MTM from China, added to purchases made since last December, is close to the total of 8.5 MTM, the market forecast that this total could reach 10 MTM.

Despite these purchases, the market knows that the figure that China has bought is not comparable to that of previous years and that the soybean is still very important, these are reasons that do not allow a strong increase and we see little of changes. in the prices.

Even when badysts reduce Brazil's 1mtm output this week, it does not affect the bearish situation. Even with a 7mtm crop in Brazil, South America's combined output will be 10mt last year. The United States also has 16 mtm more than normal. It's just on the production side.

What is also worrying is that global demand will only grow by at least half this year on average. In general, soybean consumption increases by 14 to 17 mtm per year, but if it is halved and badociated with stocks in the Western Hemisphere this year, the global surplus increases by 8 mtm (295 mbu) per year. previous

African swine fever has also played an important role in the decline of soybean exports to China since last November, which, together with trade problems with the United States, has significantly reduced this figure. Brazil, which would cover China's demand, was ready to export the bulk of its production, but the decline in grain purchases also affected that country. China has started buying soybeans in Brazil, but its purchases have dropped considerably. this country, especially as bona fide purchases are made in the United States to secure a trade agreement.

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The unofficial estimate of Brazilian production in the next report is 117 tcm, compared to 122 in December. Production in Argentina is projected at 55.15 against 55.5 in December. World net surpluses are expected to rise to 307mtm from 308.8m in December.

The market expects the USDA to reduce soybean production in the United States with slightly lower yields (51.8 versus 52.1 mbu in December) and smaller areas (88.2%). against 88.34 in December). Subsequently, a slight surplus (926 mbu against 955 in December).

In 6 of the last 10 years, soybean yields have risen slightly from November to January, generally 0.3 bpa. In other years, we saw a reduction of 0.4 bpa. The average estimate of soybean stocks in the United States on December 1 is 3,743 mbu, nearly 600 mbu higher than last year on December 1 st.

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The market remains cautious about these changes and the funds will be prepared in advance for the report on supply and demand this Friday. The release of this report will be a further step in the transparency process expected by the market a month ago, before prices become clearer. China has started its lunar new year celebrations (the year of the pig), because of the that does not provide any purchase commitment for additional volume of US products before the climax of said event, which ends February 19th. It is only late February that the US delegation will visit Beijing to continue negotiations and that the possibility of additional purchases is expected, leaving the market in the wait.

Regarding the climate in South America, we expect a positive turnaround in the forecast, with better expected moisture events in central / northern Brazil and sunnier, dry days in Argentina, which should eliminate a risk factor of the market; However, it will not be until next Friday that we will know the impact that the South American production can have on the world table and thus on the prices.

The WASDE combined report for January and February is getting closer and the market expectations are 12 092 mbu for maize stocks, a surplus of 1 708 mbu and a production of 14 630 mbu. Production figures are estimated at an expected yield lower by 1 bpa (178 vs. 178.9 in November), which is in line with the expectation of a 73 mbu surplus of less than 1,708 mbu.

Exports will be reviewed earlier and, even with unchanged yields, the USDA would be inclined to reduce surpluses. In 5 of the last 10 years, yields have been reduced from November to January. The average reduction was 1.4 bpa. The average increase in years of increase is 1 bpa.

US wheat exports are nearly 2 mtm (75 mbu) lower than last year, while the USDA has forecast a program of 2.7 mtm (100 mbu) more than last year. Unless you foresee an extremely large export increase during the counter-seasonal period, the number of exports is ready for a 50 to 100 mbu reduction.

Market expectations for winter wheat imply a slight reduction of 300,000 acres (32.2 vs. 32.5). There is also talk of abandonment, especially for SRW wheat, it will be higher this year, but this will not affect the total area. The HRW is expected at 22.6 vs. 22.9, SRW at 6 vs. 6.1, and white wheat at 3.5 vs. 3.5 million / acre.

Freight rates in the Gulf have become cheaper, the increase in bases indicates an increase in demand.