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Stricter Chinese inspection rules have pushed Cargill to suspend soybean exports from Brazil, briefly lifting US soybean prices as traders anticipated possible shifts in global trade, while export demand continues to underpin all major US commodity sectors.
Cargill Brazil has suspended all soybean exports to China after the Chinese government demanded tighter inspection protocols on imports, which took effect last week.
While officials say the exact details are still being negotiated, market analyst Bryan Hopps of Midwest Market Solutions believes the move is likely behind the recent activity in US soybean markets.
"That was the main reason we rallied yesterday, and it pushed us to new contract highs. We took out the Sunday night highs for a while, but we didn't close there. There was a lot of concern that Cargill in Brazil might halt grain exports to China over some quality concerns with the beans. The United States has always had high-quality soybeans here, and we saw a rally in anticipation of picking up some of that business. But it looks like Brazil and China will sort things out fairly quickly, and they'll resume soybean exports again," Hopps explains.
Meanwhile, Cargill has also stopped buying soybeans from local farmers in Brazil. Officials describe China's request as unusual and say it may make it difficult for traders to comply.
Corn and soybeans lead weekly US export sales activity
Corn and soybeans once again topped US export activity for the week ended 5 March, as strong grain movement and mixed livestock trade highlighted global demand trends.
Net corn sales reached about 60.3 million bushels, down week on week but still robust, led by Japan, Mexico, South Korea and Colombia. Total weekly corn exports came in at nearly 67.4 million bushels, with Mexico and Colombia among the top destinations. Net soybean sales were close to 16.8 million bushels, up from the previous week, while total exports stood at around 36.6 million bushels, led by China, Egypt, Indonesia and Mexico.
Total net wheat sales reached nearly 16.7 million bushels, sharply higher week on week, with Mexico, China, Japan and the Philippines leading purchases. Weekly wheat exports came in at about 15.9 million bushels. Total sorghum sales reached about 3.9 million bushels, driven largely by China and Spain, while exports reached around 8.3 million bushels.
In the livestock sector, net beef sales hit their highest level of the marketing year at 25,400 tonnes, led by South Korea and Japan, while pork sales fell to their lowest level of the marketing year, although exports remained steady.
The figures in the March World Agricultural Supply and Demand Estimates (WASDE) report, released earlier this week, held few surprises for the domestic market, though the USDA report included some notable adjustments to international production. Market analyst Dr Todd Hubbs says these global changes are worth monitoring in the coming months.
"We've seen some minor tweaks on the margins in international markets, you know, reflecting a slightly smaller crop in Argentina for some commodities. They trimmed Black Sea wheat exports from Ukraine and Russia a bit because the pace had been slowing, but they raised the soybean crush rate slightly and lowered soybean oil biofuel use to align with the current pace," Hubbs says.
Hubbs adds that he is also watching global competition, particularly from Brazil. He notes that although Brazilian prices are often lower than their US counterparts, closing that gap is difficult.
"They have massive operations. They spread their costs over millions [of acres]. It's vast tracts of farmland. They have a different cost structure on their farms, and they're highly competitive in the global market, especially in soybeans. You know, they're even competitive in corn when they have a good Safrinha crop, and that crop is volatile because the timing of rainfall in April and May is so critical for it," Hubbs explains.
Still, Hubbs pointed to a slight increase in domestic soybean crush, which has been offset by lower expectations for soybean oil biofuel use.
"But [Brazil], they're extremely competitive. They're the lowest-cost producers, and they've applied economies of scale on their farms, so it's really hard to compete with them," he said.
Source: RFD-TV