Mystery of the soy sold to China with no USDA alerts

Momentum trading ruled direction for the most part last week, as traders in both the wheat and corn complex tried their best to call a bottom and failed. Meanwhile on the bean side of things, we saw additional China-U.S. trade headlines and rumors push the market hard in both directions.

After the close Friday before last, Secretary of Agriculture Sonny Perdue was quoted as saying China had agreed to purchase another 10 million metric tons of soybeans, in addition to the 10 million they had already committed to buy. This allowed a bit of a pop in beans before traders started to question whether or not this commitment was immediate, or would be spread out over several years.

With the obviously burdensome supply-and-demand situation it is imperative purchases happen sooner rather than later. The idea that these purchases could be spread out over several months or even years, combined with weakening values in Brazil, pressured beans soon after the market opened on Feb. 25.

However, Perdue was quick to clarify his statement, saying the purchases would indeed happen this year. Further clarity as well as continued confirmation from members of the administration that a solution was close helped to stabilize beans and push them higher.

Over that weekend President Trump did confirm the original March 1 tariff deadline had in fact been extended indefinitely, as both nations work to iron out the final details.

We also learned that traders and industry groups are working hard behind the scenes to remove ethanol tariffs, possibly opening the door to Chinese ethanol imports – something that is desperately needed in the industry as we are struggling to increase domestic demand. Rumor had it several cargoes of corn had also been sold to China over that same weekend, but was never confirmed.

In an interesting twist, we saw 1.8 million tons of soybeans sold to China in last week’s export sales report. What’s most interesting about this is the fact that sales of more than 100,000 metric tons in a day should be reported by the USDA and announced in its flash sales report.

Though the average sale pace would have had to have been around 300,000 tons, the USDA had no such announcements last week.

Overall sales were large for all commodities, but with more than 2 million tons of soybeans sold this week, we have seen our export deficit versus a year ago cut in half. While seasonal sales and shipment pace would argue there is no way we could catch up to even current, lower USDA export projections, the idea that continued strength in exports could easily change that outlook.

Interesting to note is that the United States won a World Trade Organization (WTO) dispute with China over whether or not the Chinese government was providing excessive government support to farmers of certain crops. The panel found China was in fact using subsidies and government supports well above the limits put forth by the WTO for wheat and rice.

The Chinese government changed its approach to corn subsidies soon after the dispute was put forth, making it difficult for the panel to determine actual damages for that crop. Many see this as a victory for the U.S. and something that could put additional pressure on the Chinese as we move ahead in trade negotiations.

In other news we saw interim EPA Administration Andrew Wheeler confirmed last week. There had been some concern a battle over the Renewable Fuel Standard (RFS) could derail this confirmation, as Sen. Ted Cruz and others had said how Wheeler answered questions regarding his support of renewable fuels would have a big impact on whether they would support the confirmation.

Wheeler in the past had spoken about his support of the RFS and has made it clear he would like to see year-round E15 in place by the summer. Many in the renewable fuel industry are hopeful Wheeler will be a much-needed ally.

Weather continues to dominate the minds of traders and farmers, even if the market appears impervious to any type of bullish scenario. Many below-normal temperatures with above-normal precipitation are expected to remain in place across much of the country at least through mid-month.

With limited fall fieldwork done last year, many are starting to wonder what a cold, wet spring could mean for corn acres.

Angie Setzer is the Vice President of Grain for Citizens Elevator in Charlotte, Mich. Her market commentary can be found on Twitter by @GoddessofGrain and online at www.citizenselevator.com

The opinions and views in this commentary are solely those of Angie Setzer. Data used for this commentary obtained from various sources are believed to be accurate.