China is reportedly going to buy large volumes of grain and soybeans from the US. That, in short, was Trump's message after his meeting with Xi. More than a week has passed, and players in the grain market see little concrete evidence that China is actually buying large volumes. This had already been anticipated in the futures market. A more positive outlook is coming from Germany. A more favorable euro exchange rate could, with a bit of luck, boost European exports, according to DRV.
The December wheat contract on the Matif closed yesterday down €2,25 at €192 per tonne. On the CBoT, wheat took a bigger hit, falling 19¼ cents to $5.35½ per bushel. Corn saw its decline limited to 6½ cents, closing at $4.28¾ per bushel. Soybeans were the biggest loser on the exchange, falling 28 cents to $10.91¾ per bushel.
A lack of hard data showing that China is actually buying significant volumes of grain and soybeans from the US gripped the market yesterday. While China is actively buying from the US, it's not happening at the pace the market priced in over the past few weeks around the summit between Trump and Xi. It has since been confirmed that China bought two shiploads of wheat from the US, totaling 120.000 tons, but little of the 12 million tons of soybeans that Trump said Beijing would buy this year is visible yet.
High expectations
Due to the rally in soybeans, which began in early October, US soybeans have become too expensive on the global market, according to several analysts. For deliveries in December and January, the price for soybeans shipped to the US is slightly higher than the price in Brazil. This is even before the tariff that Chinese importers have to pay on soybeans from the US. After the talks with Trump, Beijing has lowered the tariff on US soybeans, but not completely eliminated it. The first soybeans from the new harvest will be available in Brazil again in February. The price usually drops at that time, and the gap with US soybeans can widen even further.
China doesn't necessarily need to buy soybeans either. During the first ten months of this year, China imported 95,7 million tons of soybeans, compared to 89,9 million tons in the same period last year. Brazil is by far the largest supplier of soybeans to China.
The growing season in Brazil isn't going quite as growers would like. Sowing was possible early, but there wasn't enough moisture to get the crop off to a good start and allow it to grow. As a result, some of the soybeans have been oversown. Further south in Argentina, farmers have begun sowing soybeans, according to the Buenos Aires Grain Exchange. Following recent rain, the exchange describes optimal conditions. The exchange predicts a soybean harvest of 48,5 million tons in Argentina.
Despite drought, maize yields in Germany are good
For a more positive outlook on the grain market, we'd better consult our eastern neighbors. The German Federation of Cooperatives (DRV) estimates the German grain maize harvest at 4,7 million tons. This means the harvest is 3,5% lower than last year, but still close to the long-term average. At the beginning of the season, maize suffered from drought in many parts of Germany, but despite this, yields are not disappointing. The DRV estimates the total grain harvest in Germany at 45,6 million tons. This is the largest harvest since 2017.
The trade deal between China and the US is creating positive momentum in the international market, writes Guido Seedler, market expert at DRV in his explanation of the figures. However, concrete demand from this source shouldn't be overestimated. According to Seedler, the stronger dollar presents a greater opportunity for European grain exports. Exports of grain, primarily wheat, from the EU to third countries have been sluggish in recent months. The relatively strong euro has played a role in this. Now that the dollar is strengthening, European wheat is becoming more competitive again, and demand from countries outside the EU could increase again. "This would lead to a simplification of the internal market and better prices for farmers," Seedler says.