- Chicago has seen a “down” day today as yesterday’s report is finally digested and spat out again. Fund selling has dominated the pits today, apparently from the off, and has pressured prices lower.
- In addition pressure was also imposed by news that Chinese importers have actually defaulted on at least 500,000 mt of US and Brazilian soybeans, and it could be more! The defaults have materialised in the form of non-payment as buyers were unable to open letters of credit as banks are becoming more selective on who they lend money to as the economy shows further signs of cooling. The current default represents five or six panamax size vessels `(50,000 to 60,000 mt each) which have arrived but are now unable to discharge, as well as a further five or six afloat and en route to China. The Chinese crushers have indicated that is assistance was not forthcoming in renegotiating or reselling cargoes, a further 20 to 24 cargoes could well face the same fate before the end of June.
- Chinese crushers are now losing between $80 and $100/mt on each tonne they process, compared with former profit levels of $80 to $100/mt. These former profit levels prompted huge purchases which have effectively emptied the US of old crop soybeans. The anticipation is now of a huge slowdown in China’s soybean imports in Q3, with talk of sub-15 million mt volumes compared to 18.25 million mt last year. This could well prompt a revision in global end stocks in the June WASDE report, although it will be too late to materially impact old crop pricing.
- It is estimated that as many as 21 to 23 cargoes of Brazilian soybeans have already been cancelled or resold to other destinations. Some 12 or 13 have been sold to the US, one to Africa and the balance to the EU. A further 8 to 12 are currently awaiting resale, washout or default. This leaves sellers extremely nervous and fresh sales are slow to materialise to say the least.
- Brazil’s CONAB has increased its estimate of 2014 soybean output to 86.1 million mt, an increase of 640,000 mt from last month’s estimate. Given that 85% of the crop is now gathered and that yields in RGDS and Santa Caterina are better than expected it is widely expected that the range of total output will be 86.5 to 88 million mt.
- The surprise of the day came from CONAB’s corn estimate at 75.4 million mt, an increase of 300,000 mt from March, and a massive increase of 3.4 million mt over the latest USDA number. Interestingly, CONAB have a reputation and history for underestimating Brazilian winter corn production! If CONAB’s estimate is realised, the country could be in a position to export 22 to 23 million mt in 2014/15, marginally below last year’s record 24.9 million mt. These sort of figures will provide good competition for US and a potential source for the EU should issues erupt in the Black Sea.
- Finally, we have seen yet another big week of EU wheat export certificates at 631,708 mt. The season total now sits at 25.214 million mt, which is 7.635 million mt (43.4%) ahead of last year. The weekly tonnage now required to hit the USDA’s 29 million mt figure now stands at 315,477 per week for the remaining 12 weeks of the season.