By Carrie Muehling
NORMAL – Soybean prices moved lower Tuesday on improved conditions in the Southern Hemisphere and the cancellation of a Chinese bean purchase.
While China’s cancelled 170,000 ton bean purchase does not represent a large volume, it provided some uncertainty in the soybean market. Cancellations are typical this time of year. China bought aggressively early and might now want to shift some of those sales to South America.
“What happens, oftentimes, is those are option origin purchases. What I mean by that is, they’ll buy them, but they have the option to take them here in the U.S. or in the Southern Hemisphere because a lot of these purchases are from your big commercials, and the big commercials have operations in the Southern Hemisphere so they'll move the sale from here to the Southern Hemisphere,” said Curt Kimmel, commodity broker with Bates Commodities.
Also, actual shipments purchases of soybeans usually shifts in late January or early February from U.S. to South America. Corn becomes the commodity that is exported more as spring approaches. Kimmel said spread activity has also been popular as money managers manage risk. On Tuesday, many sold beans to buy wheat or corn.
While some areas of South America are a bit dry, agronomists in Southern Hemisphere are saying overall the crop is good. Farmers there could have a record production year.
“For the most part, there is going to be ample supplies of beans on the world market here as we move through April, May and June,” said Kimmel.
Kinnel said traders will continue to monitor weather there, as well as export business to see what demand shows up. They will also watch producer selling. The acreage mix for the U.S. planting season is also a factor. Ideas are that U.S. farmers will plant more soybean acres and fewer corn acres this year. Acreage intentions are due out from the USDA at the end of March.
The main concern in livestock markets is per capita consumption that continues to drop, especially for beef. Exports remain very important. Those were strong until this winter but have decreased a bit as the strength of U.S. dollar is making U.S. products more expensive to world buyers.
Carrie Muehling can be reached at carrie@wjbc.com.
