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BRIAN HOOPS

By Staff | Nov 4, 2016

Brazil is muscling in on the peak season for U.S. soybean sales to China, the world’s biggest buyer, as major producers vie to slim down bulging stockpiles after four years of record global output.

In deals signed last week, exporters from the Latin American country have sold four shipments to China for delivery in November and December and more are being negotiated, trading sources said, eating into U.S. market share with aggressive pricing.

The increased competition could renew pressure on benchmark U.S. soybean futures, and comes as U.S. growers are midway through harvesting a record crop. “The U.S. really needs to have strong exports this year otherwise it will become the world’s storage house for beans,” said a Singapore-based trader with an international firm that has oilseed processing facilities in China.

Brazil and Argentina, the world’s biggest and third-biggest exporters, normally harvest over February-March and dominate global trading through to September. The United States, the second-largest exporter, harvests in August-October and sells about half of its annual exports of 50-52 million tonnes in the December quarter.

This year, however, Brazil and Argentina still have capacity to export an estimated 10-12 million tonnes of soybeans despite aggressively selling in the past months, traders said, reflecting growing output.

CORN ANALYSIS

Corn closed the week 3 cents higher.

Last week, private exporters did not report any private sales. In the weekly export sales report, sales of corn showed a total of 31.5 million bushels (799,300 metric tons) with all for the 2016-2017 marketing year.

This was above the 29 mb (737,200 mt) needed this week to be on pace with USDA’s October demand projection of 2.225 billion bushels.

NASS reported U.S. corn harvest advanced to 61 percent complete versus 60 percent expected, 46 percent last week and 62 percent on average.

Harvest is nearly completed in the majority of the Corn Belt as unseasonably dry conditions have allowed combines and fall tillage equipment to rapidly harvest this year’s crop and finish much of the fall fieldwork.

A higher quality crop has been harvested with producers reporting little drying costs associated with this year’s corn. Yield estimate continue to trend mixed and the November supply/demand report will likely show a slightly smaller corn crop compared to a month ago.

Farmer selling will slow and basis levels will likely improve during the winter and the cash market should rally as it will be the only way to pry cash crop out of farmers hands with stronger basis levels.

Strategy and outlook: Use rallies to sell inventory.

SOYBEANS ANALYSIS

Soybeans closed the week 17 cents higher.

Last week, private exporters reported sales of 912,000 mt to China; and 129,000 mt of soybeans to an unknown destination.

In the weekly export sales report, sales of soybeans showed a total of 75.2 mb (2.04 million metric tons) with all for the 2016-2017 marketing year. This was well above the 18.6 mb (538,800 mt) needed this week to be on pace with USDA’s October demand projection of 2.025 bb.

Soybeans are now 76 percent harvested versus 77 percent expected, 62 percent last week and 76 percent on average.

Harvest is nearly completed in the majority of the Corn Belt as unseasonably dry conditions have allowed combines and fall tillage equipment to rapidly harvest this year’s crop and finish much of the fall fieldwork.

Yield estimate continue to impress and the November supply/demand report will likely show a larger soybean crop compared to a month ago.

Farmer selling will slow now that harvest is complete, basis levels will likely improve and the cash market should rally as it will be the only way to pry cash crop out of farmers hands with stronger basis levels throughout the winter.

The huge demand base for soybeans comes in the form of strong export demand and increased consumption of oil for soy bio-diesel usage. Despite the demand, ending stocks are forecast increase to above 400 mb.

The market will be anticipating a record soybean crop in South America and updates on this year’s production from South America will be a major driving force for prices throughout the winter.

Weather during the South American growing season will be closely watched.

Strategy and outlook: Use rallies to sell inventory.

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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