September 25, 2019 | FBN Insights | Kevin McNew

COFCO Sees Increased China Corn Imports

Chinese commodities trader expects sharp drop in amount of soybeans it will import from Brazil this year

COFCO Sees Brazilian Soybean Exports Slowing In 2020 

On Tuesday, Sep. 24 Chinese commodities trader COFCO told Reuters that the company expects a sharp drop in the amount of soybeans it will import from Brazil this year. 

The nationwide spread of African swine fever (ASF) continues to suppress demand for animal feed. 

COFCO told Reuters the agency’s soybean imports from Brazil could decline to 5 MMT in 2019 from 7 MMT in 2018. 

COFCO is anticipating that it could source 3.8 MMT of Brazilian corn during 2019, up from 2.5 MMT in 2018.  

The ASF outbreak in China has killed millions of animals while causing soybean demand to sharply decline.  

FBN’s Take On What It Means:  We believe that COFCO’s Chinese demand assessment from Brazil is interesting but leaves out many key details.  While aggregate Chinese feed inputs demand is expected to decline we believe that COFCO’s statements about increasing Brazilian corn exports to China underscores lingering questions about the size and quality of Chinese corn supplies.  While China does not import material amounts of corn and corn byproducts, DDGS, from the U.S., we look to the U.S./Chinese trade negotiations to see if U.S. corn can gain any market share into the country.         

Reuters September Grains Stocks & Small Grains Estimates

On Monday, Sep. 30 the USDA releases its quarterly U.S. grain stocks report and Small Grains report.  The quarterly stocks report is based on reported on and off farm stocks levels as of Sep. 1.   

Reuters’ average corn estimate is 2.428 billion bushels (BBU).  If achieved this would be the largest Sept. 1 stocks since 1988. 

The average Reuters soybean stock estimate is 982 million bushels (MBU)  This would be the largest Sept. 1 figure on record.

The average Reuters’ wheat stocks estimate is 2.318 BBU and is - 3% from Sept. 1, 2018.     

The focus of the small grains report is centered around 2019 U.S. wheat production.  All wheat is estimated at 1.968 BBU, -12 MBU from USDA’s latest forecast. 

Average Reuters HRW is estimate is 841 MBU, SRW 256 MBU and spring wheat 585 MBU.    

FBN’s Take On What It Means: At FBN we believe that the estimated September 1 soy and corn stock numbers from Reuters are directionally correct and represent the lingering bearish 18/19 supply and demand fundamentals from the USDA’s September WASDE.  The wheat production estimates for the Small Grains report are not much of a surprise to FBN as we expected a large spring wheat crop. Trade expectations for all wheat stocks are smaller than FBN’s estimates but the key takeaway is that wheat stocks are expected to be hefty.  

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

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