The political negotiations between the United States and China may be difficult, but the export of soy and corn from the US to the Asian country is anything but. Coincidence on well planned? At the end of last week, the order book was closed with another mega order.
The American CME Group ended the week well on the CBoT futures market. USDA figures in one week amounted to 1 million tons of grain corn purchased by Chinese buyers in the US for the current export season. On Friday, one order of 4 tons of corn was received.
Sales increased fivefold
These huge figures are in addition to the 5 million tonnes sold to the country in January and February. Five times more than last year. These export levels have not been seen since 1991 - the year the USDA started reporting numbers.
Market analysts consider the purchases very coincidental. Especially in the week that negotiations are taking place between both governments, China is at home. "It shows that the Chinese are sympathetic," says a trader. The country does not have much choice. The US is currently the only country that can supply large volumes and the price is good.
Brazil lags behind
Last season, China bought the lion's share of its raw materials (corn and soy) in Brazil. In addition, the pig herd in the country shrank sharply due to the consequences of the African swine fever. Now that the livestock is being rebuilt, an enormous amount of feed is required. The Brazilians cannot deliver, because they are experiencing problems on all fronts. Stocks have been depleted by China, the harvest is affected by the weather and exports are also not going well.
The trade war between China and the US was followed by Trump's famous Phase One deal. It was agreed that the country would purchase $2020 billion in agricultural goods in 36,5. That level was not achieved. Another $2021 billion is planned for 43,5. Analysts expect that this level will not be reached, but no one will complain about that as long as the country continues to apply its current sales policy.
More soy
China will continue to knock on American doors for corn for a while. Soy is now at a tipping point now that more of the raw material can be loaded in Brazil. In January and February, 80% less was exported, according to Brazilian export figures. This concerns 1,03 million tons of beans compared to 5,14 million tons a year earlier. During the same period, the US exported a whopping 11,9 million tons of soy to China. Overall, the country purchased slightly less soy.
The soy market in the US is being pushed up and feed manufacturers in Europe and therefore the Netherlands are also noticing this. Thanks to a healthy oil market, processing (crushing) soybeans yields good money. The leftover soy meal and scrap go into the Chinese feed industry. Yet new ASF outbreaks continue to occur in the country. That brings with it some degree of uncertainty. If the pig sector takes a hit, this will be immediately noticeable in the demand for soy.
New increase?
Record-breaking export figures in the US naturally strengthen the futures prices of corn and soy. Whether these prices can increase further depends on new orders that China will place. Both commodities are now reaching the ceiling of their range in the market. The chance of a breakout to the top or bottom increases.