Soybeans Hammered in the Overnight

Decent USDA Weekly Export Sales Report Numbers

October 2, 2020

Soybeans were hammered overnight as Brazil’s economy was thrown into a tailspin on potential political corruption by the President. In outside markets, US equities continued their slide and crude oil was off in a risk-off start to the day.

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Late yesterday news broke that Brazil’s president Temer gave his blessing to pay a potential witness to remain silent in the country's biggest-ever graft probe. If accurate, this could pull Temer into a corruption scandal that has already entangled several of his closest allies and advisors. Leading lawmakers and a third of Temer's cabinet have already been caught up in an investigation of systematic bribery in return for political favors and contracts with state-run enterprises. Investors dumped Brazilian assets in foreign markets after the news broke late in Brazil. The Brazilian Real plunged 7% in overnight trade, which immediately sent US soybean prices down nearly 2%. Brazil farmers have been holding tight to their mammoth soy crop as the Real has climbed nearly 10% since the first of the year. This plunge should lead to a mass selling wave of Brazilian farmers.

In other news, overnight Japan bought 80,000 MT of US wheat in its regular tender activity while Canada garnered 35,000 MT of the total 115,000 MT deal. Private analyst Strategie Grains cut its EU wheat estimate by 1.1 MMT to 142.7 MMT. This still would be up 5% from last year’s crop. Likewise, they trimmed their corn estimate by 0.3 MMT to 60.1 MMT. If realized, this would be up 0.3% from last year.

USDA’s weekly export sales were decent this week as the data came in mostly on the high side of analyst expectations. Under normal circumstances this might be a positive stimulus for the market that has struggled with export business, but this will take a backseat to the situation in Brazil. The risk could be substantial to the downside for soybeans, and perhaps even corn.

Export Sales-