February 12: Soybean Prices Get Their Groove Back

Now, that’s what I’m talking about. Soybean prices ignored weak trade data and pushed higher thanks to weather premiums from South America.

Let’s be clear on one thing before we start the high fives. China canceled another big order of U.S. soybeans, news that comes just days after reports of the nation canceling four cargoes of corn shipments. This isn’t good news and could spell problems in the months ahead.

But right now, we’re focusing on the forecast down in Argentina.

Let’s dig into that news and other events in today’s grain trade.

March Soybean Prices Surge Above $10.00

It’s starting to look like February will create a few windows to sell soybeans at a nice price.

The March futures contract jumped above $10.00 for the first time in two weeks. The contract added a mouth-watering 18.75 cents and finished just shy of $10.02 per bushel.

That May contract also was on a rocket ride today. The contract closed at $10.125 after adding 19 cents.

The push came from the more dry weather. Analysts are expecting that the hot, dry temperatures will do more damage to the crop than the USDA has forecasted. While several major analysts and trade groups have pegged the Argentine crop down to a range of 51 MMT to 52 MMT, last week’s WASDE report showed 54 MMT.

The USDA did still report a cut of 2 MMT. But I think it’s in the nature of the agency to take that number down slowly through the March and then April report.

How significant of a cut do the markets expect? I would say a-ways to go given the fact that traders pretty much ignored the elephant in the room on Monday.

Or is China the tiger in the room?

Today, China canceled a whopping 16.7 million bushels (455,000 MT) for delivery. (The reason it was partially ignored was an 11.5-million-bushel order to unknown destinations that went through the order system.)

What happened: China is studying the impact of trade measures around U.S. soybeans.

Translation – they’re thinking about restricting U.S. soybeans in their market and thinking about how it would impact their crushing market.

This isn’t good news…

In fact, last week the nation’s Ministry of Commerce held a meeting to discuss the impact, and they didn’t invite any representatives from the U.S. Soybean Export Council to attend.

Now there are a couple of factors at play.

First, U.S. soybeans have lower protein quality than those from Brazil. This has fueled a tremendous rise in demand from Brazil while leaving the U.S. as a weakened trade partner.

Second, China has additional quality concerns about the U.S. soybean supply chain and asked American leaders to enhance quality assurance protocols in recent months.

Third – and the biggest reason that this is happening – is a brewing trade war. Recently, the Trump administration slapped tariffs on washing machines and solar panels, which is prompting some retaliatory actions.

There isn’t a person in the sector nervous about what is coming next.

Today, there was a positive trade report to offset those concerns. (Total inspections for the week ending Feb. 8 came in at 1.32 MMT, about 14% higher than this period last year).

With that in mind, if you’re going to retaliate, it’s not the best action to take aim at globally abundant commodities. We’re going to dig deeper into the numbers on this all week.

Wheat Prices Whip Higher Monday

It was another solid day in the wheat complex thanks

In Kansas City, March HRW contracts added 12 cents to close the day at $4.775. The May contract was up 12.25 cents to close just under $4.93 per bushel. Those gains were aided by news that managed money has flipped its short position to a net long position of 15,157 contracts.

In Chicago, March SRW contracts added 15 cents to close the day at $4.64 per bushel and narrow that spread with the KC contract. The May contract added 15 cents and closed at $4.76 per bushel.

MGEX contracts for March spring wheat grabbed a 6.5-cent gain. The contract closed at $6.10.

It wasn’t just weather in Argentina that helped push wheat higher.

We saw a very positive export number for the week ending February 8.

Export inspections totaled a little under 488,000 MT. That was a 50% jump from the same period in 2017, and about a 13.5% increase from the previous week.

Corn Prices Jump on Argentine Weather Woes

Across the board, limited rains in Argentina gave a boost to corn prices.

The March contract added 5 cents to close at $3.67. The May contract added 5 cents and finished just under $3.75.

In positive trade news, South Korea bought another 120,000 MT of U.S. corn as part of a recent tender. We also saw 32.9 million bushels move through export inspections for the week. That was on the low end of trade expectations.

About the Author
Garrett Baldwin

Garrett Baldwin is a content strategist and editor at FarmLead. He covers the global grain markets and public policy issues related to the agricultural industry. He is a graduate of the Medill School of Journalism at Northwestern University. He also holds a Master’s Degree in Economic Policy from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University, and an MBA in Finance from Indiana University.

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