By G.C. Mays
The USDA released its export sales report for the sales period October 20 - 26 2017. Soybean sales off slightly compared to a week ago, corn sales sagged and wheat sales dipped for the second consecutive week.
Net export sales of wheat during the week ending Oct 26 were 3.5% lower than the earlier week but 48% higher than the same week a year ago. The bulk of the week's sales went to Asia, followed by countries in the western hemisphere, and finally Africa. In Asia, the Korean Republic was the largest buyer, purchasing 100,000 metric tons. In the western hemisphere, Mexico purchased 69,100 metric tons and in Africa Nigeria procured 42,000 metric tons.
Mexico recently announced that they would be importing wheat from Argentina as part of a plan to diversify its grain and oilseed trade due to uncertainty with NAFTA. So far this marketing year, Mexico has exported 65% of their total buy commitment from the U.S..
December wheat futures moved higher by a just over a nickel during the week of October 20 - 26, to $4.32 per bushel. For investors that prefer the Teucrium wheat ETF (WEAT), it gained $0.06 per share over the same period. However, cash prices at the gulf export terminal increased by $0.09 during the week to $4.79.
Accumulated net sales are down 13% compared to a year ago.
Despite minimal cancellations, net corn sales slumped 37% to 811,400 metric tons during the week. Two-thirds of the sales went to countries in the western hemisphere (314,600 metric tons) and Japan (222,700 metric tons). Mexico and Peru were the leading buyers in the western hemisphere.
Marketing year to date accumulated net corn sales are down 20%.
Corn futures were rose during the week by $0.06 cents to $3.51 per bushel. Cash prices at the Gulf export terminal rose a little less during the week but were $0.02 higher nevertheless. Interestingly, the Teucrium Corn ETF (CORN) surged by $0.22 cents. This large divergence between the Teucrium corn ETF and the current futures contract occurred in part because the current holdings of the Teucrium Corn ETF include the March, May, and December 2018 futures contracts while the December 2017 futures contract remains the contract with the highest open interest.
Soybean net sales of 1.97 million metric tons were down 7.6% compared to a week ago. Cancellations loomed large at 245,800 metric tons, a marketing year high. Of the cancellations originating from known destinations, China (104,600) and Taiwan (66,000) made up the greatest. While Taiwan's cancellation lowered their net sales to a paltry 6,500 metric tons, China still managed to buy 1.53 million metric tons. They even sold us 66,000 tons during the week. China will remain the key driver of global soybean demand with the U.S. and Brazil competing for that business.
November soybean futures continue their descent, dropping another $0.15 during the week to $9.71 per bushel. Cash prices at the gulf export terminal also declined, dropping just under $0.15 during the week. Prices at the gulf export terminal have since rebounded, rising to $10 per bushel as of November 1. The Teucrium Soybean EFT (SOYB) was only down $0.10 during the period. We'll see how the futures and cash price reversal affects next week's export sales report.
The USDA's will release its November WASDE report next week at 12 NOON, the same day as weekly export sales for the second straight month. Below are a just a few of changes the market may see in next week's WASDE report:
- In Argentina, for wheat, higher beginning stocks as well as lower production offset by lower exports. For corn, higher beginning stocks more than offset by lower production resulting in lower ending stocks.
- In China, forecast soybean production increased to 14.4 million metric tons, imports unchanged. Lower crush and higher ending stocks.
- In Australia, 2016/17 wheat production 1.5 million metric tons higher than expected. 2017/18 beginning stocks higher by 1.5 million metric tons, exactly offset by lower production estimates in the current marketing year.
- While year-to-date soybean sales are fairly consistent with year ago levels, in my opinion, farmers and investors should wonder "What price level will trigger a sustainable surge in demand that more than offsets the price decline?"
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I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.