- Today has seen Chicago markets lower (maybe a day later than we would have liked!) in what has been described as “moderate” volume, front month (May ’16) corn is testing an open chart gap formed between March 11 and 14 and May ’16 soybeans having broken through the 200 day moving average resistance are now using that level as support for now. The market is trading technicals rather than fundamentals and that is the point we have been attempting to make in recent days.b Today’s reports have suggested that the funds have been sellers in soybeans, corn, wheat, soybean oil whilst buying soybean meal today.
- There is worry that China may be raising a new pythosanitary hurdle in its latest CIQ (the Chinese Quarantine Agency) demand that it seeks contract certification that the Zika virus does not exist in mosquitoes or larva in soy cargoes. The request has initially been for Brazilian, but most US exporters expect that such certification will also be demanded from the US as the virus spreads across the Southern US in coming months. One Brazilian port is already certifying that cargoes will be Zika free, and exporters are urged to fumigate at discharge to be absolutely sure. The lack of certification at other Brazilian ports may allow Chinese buyers to wash out of cargoes and take a profit at a reduced cost.
- Recent history reflects that Chinese grain/soybean importers have been able to use tougher CIQ demands to their benefit. Recent cases include Canadian canola (residue contamination), GMO US corn, and red beans (dioxin) back in 2004. We doubt that Zika will pose as much as a pythosanitary problem, but there is no doubt that with Chinese soybean crush margins at their lowest level in two years, that there could be a desire to slow future imports (maybe we are just cynical!).
- We note that a cargo of Brazilian soybean meal has set sail for the US, the first this year
- S American and Chinese cash traders now estimate that 6-9 cargoes of Brazilian soybeans have either been washed out or switched (to Argentina) in the past 24 hours, and there is a desire to do more. Soybean oil market length is record large and it is estimate that funds are long nearly 50,000 contracts of soybeans. If Thursday’s US sales report does not hold solid sales totals, we would look for further liquidation into the long holiday weekend. So many cash soybeans have moved in the Midwest, it feels like a second harvest! Research argues that a seasonal high was set yesterday in soybeans with the market make-up now more balanced heading into the March 31st report. Unfortunately, the world is still awash in grain.