Sean K. Treasure
I’d like to take a moment to address the Chinese cancellation of soybean sales. The soybean export market is an interesting one. There’s trade practices involved that are routine for soybeans, but aren’t nearly as common in other grains. Specifically, exporters frequently enter into what are called “frame” contracts for soybean trades. Essentially, a frame is an agreement that Party A will sell Party B X amount of soybeans for some widely defined shipment period. Basically, there are no teeth in such a transaction. Since there’s no price attached, nobody has really taken a position. The problem comes when these sales are reported to the USDA. This is why soybeans tend to have significantly more cancellations than the other crops. It’s a frustrating game for those that aren’t directly involved since we really don’t have any ideas what sales are legit and which aren’t. In any case, it’s something we’ll have to deal with; I suspect we will see more cancellations before the year is done.
Thursday’s export sales report once again had some impressive numbers, with the exception of wheat. Soybeans stole the show, outpacing expectations in a big way with net sales of 1,133,200 MT. However, as noted above, a cancellation of 285,000 MT of Chinese business was reported yesterday causing a negative tone in the market. I still feel like soybean sales will outpace USDA expectations, but the market is still attempting to stir up more demand. That may have something to do with the somewhat disappointing NOPA crush numbers for December coming in at 165.383 million bushels; a big number for sure but less than trader expectations. Continuing with the export sales report, Corn was also relatively big at 818,000 MT. The figure is neither bearish nor bullish in my opinion. Wheat was again the dog, with net sales of only 284,000 MT for all classes. That is a bearish figure; the market dropped as it attempts to price US wheat competitively in the global marketplace.
For the week, March corn closed down 13 ¼ cents and March beans finished down 54 ¾ cents. In the wheat, nearby Chicago finished off 31 cents, Kansas City was down 23 ½ and Minneapolis March closed down 18 ¾ cents.
Basis levels are much stronger for the week across most of the grain spectrum amidst weaker futures, particularly in soybeans. Basis is going to have to do the work if the market is going to draw grain out of farmer bins; this time of year isn’t known for huge amounts of farmer selling. Still, with futures trading with very little carry, the market is telling producers to sell the front end. I suspect that they will do just that, though not in the volume the market would like to see.
Chicago Gulf PNW
Soybeans: Option H .82H 1.00H
Corn: +.04H .67H .90H
SRW: +.30H .85H N/A
HRW: N/A 1.05H (12 Pro) 1.10H (11.5 Pro)
DNS: 1.10H N/A 2.50H (14 Pro)
SWW: N/A N/A 1.20H
It was a busy week in the global trade particularly for corn. Cheap vessel freight coupled with cheaper commodity prices makes this an enticing opportunity for importers.
· Japan bought 146,819 MT of US/Canadian (Feb 21-Mar 20) and Australian (Mar 1-31) wheat including:
· US: 3,350 MT Western White, 25,240 HRW 11.5 pro, 25,577 NS/DNS 14 pro
· Canada: 61,492 MT Western Red Spring 12.5 pro
· Australian: 31,260 MT Standard White
· Taiwan’s MFIG bought 50,000 MT of corn for Feb 25-Mar 17 shipment. Likely US origin.
· Israeli private buyers purchased 100,000 MT of optional origin corn. Likely Ukrainian origin
· South Korea’s corn processing association tendered for 55,000 MT of corn for May arrival
· Interesting news out of Thailand where the government announced their intent to sell 17 million MT of stockpiled rice over the next two years. Definitely bearish rice.
· The Russians are making it even more difficult to do business with them. They introduced a new set of “informal” export curbs including more stringent quality monitoring.
Please don’t hesitate to contact me with any questions or comments. [email protected]
Happy trading!
Sean K. Treasure
Disclaimer: Commodity trading involves substantial risk and may not be suitable for everyone. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this wire and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.
I’d like to take a moment to address the Chinese cancellation of soybean sales. The soybean export market is an interesting one. There’s trade practices involved that are routine for soybeans, but aren’t nearly as common in other grains. Specifically, exporters frequently enter into what are called “frame” contracts for soybean trades. Essentially, a frame is an agreement that Party A will sell Party B X amount of soybeans for some widely defined shipment period. Basically, there are no teeth in such a transaction. Since there’s no price attached, nobody has really taken a position. The problem comes when these sales are reported to the USDA. This is why soybeans tend to have significantly more cancellations than the other crops. It’s a frustrating game for those that aren’t directly involved since we really don’t have any ideas what sales are legit and which aren’t. In any case, it’s something we’ll have to deal with; I suspect we will see more cancellations before the year is done.
Thursday’s export sales report once again had some impressive numbers, with the exception of wheat. Soybeans stole the show, outpacing expectations in a big way with net sales of 1,133,200 MT. However, as noted above, a cancellation of 285,000 MT of Chinese business was reported yesterday causing a negative tone in the market. I still feel like soybean sales will outpace USDA expectations, but the market is still attempting to stir up more demand. That may have something to do with the somewhat disappointing NOPA crush numbers for December coming in at 165.383 million bushels; a big number for sure but less than trader expectations. Continuing with the export sales report, Corn was also relatively big at 818,000 MT. The figure is neither bearish nor bullish in my opinion. Wheat was again the dog, with net sales of only 284,000 MT for all classes. That is a bearish figure; the market dropped as it attempts to price US wheat competitively in the global marketplace.
For the week, March corn closed down 13 ¼ cents and March beans finished down 54 ¾ cents. In the wheat, nearby Chicago finished off 31 cents, Kansas City was down 23 ½ and Minneapolis March closed down 18 ¾ cents.
Basis levels are much stronger for the week across most of the grain spectrum amidst weaker futures, particularly in soybeans. Basis is going to have to do the work if the market is going to draw grain out of farmer bins; this time of year isn’t known for huge amounts of farmer selling. Still, with futures trading with very little carry, the market is telling producers to sell the front end. I suspect that they will do just that, though not in the volume the market would like to see.
Chicago Gulf PNW
Soybeans: Option H .82H 1.00H
Corn: +.04H .67H .90H
SRW: +.30H .85H N/A
HRW: N/A 1.05H (12 Pro) 1.10H (11.5 Pro)
DNS: 1.10H N/A 2.50H (14 Pro)
SWW: N/A N/A 1.20H
It was a busy week in the global trade particularly for corn. Cheap vessel freight coupled with cheaper commodity prices makes this an enticing opportunity for importers.
· Japan bought 146,819 MT of US/Canadian (Feb 21-Mar 20) and Australian (Mar 1-31) wheat including:
· US: 3,350 MT Western White, 25,240 HRW 11.5 pro, 25,577 NS/DNS 14 pro
· Canada: 61,492 MT Western Red Spring 12.5 pro
· Australian: 31,260 MT Standard White
· Taiwan’s MFIG bought 50,000 MT of corn for Feb 25-Mar 17 shipment. Likely US origin.
· Israeli private buyers purchased 100,000 MT of optional origin corn. Likely Ukrainian origin
· South Korea’s corn processing association tendered for 55,000 MT of corn for May arrival
· Interesting news out of Thailand where the government announced their intent to sell 17 million MT of stockpiled rice over the next two years. Definitely bearish rice.
· The Russians are making it even more difficult to do business with them. They introduced a new set of “informal” export curbs including more stringent quality monitoring.
Please don’t hesitate to contact me with any questions or comments. [email protected]
Happy trading!
Sean K. Treasure
Disclaimer: Commodity trading involves substantial risk and may not be suitable for everyone. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this wire and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.
