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May 18, 2020 | FBN Insights | Kevin McNew

Ag Markets Start Week Firmer, Looking for China to Increase Buying

China remains under pressure to buy more U.S. agricultural products under Phase 1 trade deal

China Urges Food Companies to Boost Supplies 

  • The Ministry of Commerce has asked trading firms and food processors to increase inventories of grains and oilseeds.
  • A possible second wave of coronavirus cases and worsening infection rates elsewhere raise concerns about global supply lines.
  • One of the main concerns is how the epidemic in South America might impact supplies of soybeans to China.
  • China's state-owned agriculture conglomerate COFCO and grain stockpiler Sinograin have increased buying.

FBN’s Take On What It Means: China remains under pressure to buy more US agricultural products under the Phase 1 trade deal. US officials stated that the deal was not falling apart despite the administration’s unhappiness with China's handling of the coronavirus outbreak. Chinese buyers have accelerated new crop soybean purchases, booking 374,000 tonnes, compared with an average of 60,000 tonnes for this period since 2016. US beans are competitive from September onwards, and FBN would expect prices to be supported as China steps up purchases. 

 

NOPA Reports Record Soybean Crush for April

  • NOPA members processed 171.8 million bushels of soybeans last month compared to the previous April high of 161 million in 2018.
  • Soybean crush fell 5.3% from an all-time record in March, but was still above market expectations for the fifth month in a row.
  • Soymeal exports in April fell to 891,000 tonnes from 973,700 in March, but were above the 763,000 shipped last year.
  • Soyoil stocks stood at 2.111 billion pounds, up from 1.899 billion pounds at the end of March and were 18% higher than a year earlier.

FBN’s Take On What It Means: The soybean crush rate continues to outpace analysts’ expectations. Seasonally, processing pulls back into August before new supplies become available at harvest. Given the large old crop stocks forecast from USDA, it appears the agency’s projection is reachable. Processors will need to continue at an elevated rate, though relatively lower crush margins remain a concern.     

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