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BRIAN HOOPS

By Staff | Jul 29, 2016

China’s soybean imports may fall for the first time in 15 years next season as the government sells from stockpiles and domestic production climbs, according to Oil World.

Inbound shipments by the biggest importer may drop as much as 4 percent to 80 million metric tons in the 12 months starting August, the Hamburg-based researcher said in a report.

The government will reportedly sell about 4.3 million tons from stockpiles accumulated in the past few years, Oil World said.

Chinese inventories are still “very high” and crushers and importers have preferred using stockpiled beans in recent weeks, the researcher said. Prices have jumped this year, with U.S. futures climbing 22 percent and soybean meal, a byproduct used in animal feed, rallying 38 percent.

Chinese farmers will probably boost output by more than a quarter next season, the researcher said.

CORN ANALYSIS

Corn closed the week 15 cents lower.

Last week, private exporters did not report any private sales.

Weekly export sales of corn showed a total of 33.5 mb (851,400 mt) with 13.6 mb (345,100 mt) for the 2015-2016 marketing year. This put total old crop sales at 1.9 billion bushels, on par with USDA’s July demand projection of 1.9 bb.

Corn conditions were rated 76 percent good-to-excellent versus 75 percent expected, unchanged from 76 percent last week and well above 69 percent ratings last year.

The report showed corn ratings the third best in the last 16 years. Iowa is rated 81 percent g/e; Illinois 80 percent, Minnesota 82 percent and Nebraska 82 percent g/e.

Due to the high crop ratings, look for USDA to increase yields in future reports and increase ending stocks as well. In fact, only 1 time in the last 51 years when ratings have been this high, has the U.S. failed to produce a crop of at least trendline yields.

With the increase in production, supply will outpace demand and ending stocks will swell. Harvest lows will be determined by how large the ending stocks end up being.

Strategy and outlook: Producers should have made cash sales and used options to manage price risk and summer volatility.

SOYBEANS ANALYSIS

Soybeans closed the week 67 cents lower.

Last week, private exporters reported sales of 320,000 metric tons of soybeans to an unknown destination.

Weekly export sales of soybeans showed a total of 48.7 mb (1.32 million metric tons) with 11.9 mb (325,000 mt) for the 2015-2016 marketing year.

This put total old crop sales at 1.91 bb, 6 percent above USDA’s July demand projection of 1.795 bb.

Soybean conditions were 71 percent good/excellent versus 71 percent expected, unchanged from 71 percent last week and well above 62 percent last year.

This was the second highest soybean rating in the last 22 years.

Iowa is rated 80 percent g/e; Illinois 76 percent, Minnesota 78 percent and Nebraska 77 percent g/e. It is still too early to justify an increase in soybean yields, but trendline yields seem likely. Production will match the demand pace, leaving ending stocks near unchanged.

The market is trading an inverse currently, encouraging producers to sell production off the combine rather than storing crop into the summer.

Strategy and outlook: Producers should have made cash sales and used options to manage price risk and summer volatility.

This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department. Brian Hoops can be reached at (605) 660-1155.

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