Chicago soybeans breaking lower, Chinese ports full

CNS Canada — Chicago Board of Trade soybean futures moved lower during the week ending Wednesday, with slowing Chinese demand behind the declines.

China started to cancel purchases of South American soybeans during the week, which prompted fears that they might also cancel U.S. orders, said Scott Capinegro of Barrington Commodities at Barrington, Illinois.

“The trade is worrying about future purchases from them, because they do have some ships at sea going toward China, and their ports are full right now,” Capinegro said. “That’s what makes the bean market awful tough when you have one major world customer. They control the destiny of prices.”

China is cancelling soybeans because “they’ve got so much beans they don’t know what to do with them,” Capinegro said. But that doesn’t mean they won’t start buying again.

“We’ve seen China play the games over the years,” he said. “They cancel, get the market to break and later on down the road, they start booking again.” [Related story]

How much demand comes from China will be a main driving factor going forward, though some of the focus will also start to shift to the upcoming U.S. soybean crop.

The U.S. Department of Agriculture will release its farmer survey of planted acreage for all crops on March 31, which will give a better idea of how large the U.S. soybean crop will be.

Capinegro expects U.S. soybean acreage to be larger than last year, and bigger than the USDA’s projection of 79.5 million acres, made at its outlook forum conference in late February.

“This month we’ve been on a rally, and rallies aren’t going to tell a farmer ‘Don’t plant’,” he said.

Chicago Board of Trade (CBOT) corn futures managed to move higher during the week, riding on the coattails of the sharply stronger U.S. wheat market.

Continued good demand from the export, domestic feed and ethanol sectors were also supportive, as were some worries about possible prolonged winter weather delaying spring planting.

Where prices move going forward will all depend on what the USDA projects as 2013-14 ending stocks, as well as 2014-15 planted acreage, in its report on March 31.

Capinegro thinks the USDA’s feed usage number is too high because a lot of feed demand from the U.S. hog sector is going to be reduced by the loss of supply due to the porcine epidemic diarrhea (PED) virus.

“If we lost just three per cent of our hogs, we lose 50 million bushels of corn that we feed. And of course we’re still scratching our heads asking ‘Where’s the cattle?’,” he said.

“So, I think their feed usage is too high, and we may see a 100 million, maybe 125 million-bushel increase in old-crop stocks, putting us right back to a 1.6 billion bushels stock number.”

The last time U.S. corn ending stocks were at 1.6 billion bushels was around 2003 to 2005, when corn prices dropped below US$3 per bushel, said Capinegro.

“There are some red flags,” he said. “Maybe we take one more stab at the new high that we saw last week, and that could be the highs for the spring going right into the planting until we have maybe a summer weather scare.”

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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