Soybean Export Sales Hit New Low During Week Ending November 16

|
Includes: CORN, SOYB, WEAT
by: The Mays Report

Summary

China only buys 407,100 metric tons of soybeans last week.

U.S. is seemingly losing market share to Russia in global wheat market.

Corn sales up last week; marketing year-to-date sales remain lower.

By G C Mays

The USDA released its export sales report for the period November 10-November 16, 2017. After the previous week's dismal sales, futures prices dropped across the board. The price declines were not enough to stimulate sales as discussed below.

Wheat

Wheat sales declined for the second straight week to 199,800 metric tons. This was 72 percent below the same week a year ago. The USDA recently raised its estimate of global wheat exports to 182.2 million metric tons. Russia is clearly capturing the expanding market share so far. I discuss Russia's emerging dominance in a recent analysis entitled "Wheat Exports From Russia May Dominate In 2017/18 While U.S. Market Little Changed". One of the factors contributing to Russia's market share grab is its decision in October to offer a transportation discount on grain exports. U.S. exporters will have to decide if they want to counter with similar transportation discounts, further price reductions, or simply stand pat.

December wheat futures continue to move in sync with cash prices. Futures and cash prices ended the week down 1.7 percent. Prices in the Gulf diverged slightly, falling only 1.3 percent. The Teucrium Wheat ETF (WEAT) declined 1.4 percent over the same period.

Corn

While corn export sales of 1.08 million metric tons were up just under 14 percent during the week ending November 16, they were below their four-week average of 1.3 million metric tons and 36 percent below the same week a year ago. Japan (289,000), Mexico (139,100), and Peru (207,000) accounted for nearly 59 percent of net sales. Accumulated marketing year-to-date net sales are down 15 percent.

Corn futures dipped $0.05 cents or 1.4 percent during the week, moving mostly in line with cash prices. Prices in Chicago and the Gulf decreased 1.6% and 1.2%, respectively. Price movement in Toledo was more subdued, falling just 0.3%. The Teucrium Corn ETF (CORN) plunged $0.31 cents, or 1.8%. The reason for this decline is unclear. However, the ETF did rebound the day after the end of the measurement period, recovering $0.28 cents of the original decline.

Soybean

Soybean (SOYB) export sales are down for the fourth week in a row, dropping to 869,100 metric tons, a marketing year low. Accumulated net sales had trended from flat to slightly down year over year. Over the last two weeks, year-over-year accumulated net sales have moved solidly into negative territory and are now down 7.9 percent. As previously discussed, competition from Brazil is pressuring sales. According to the USDA, Brazil is continuing to dispose of inventories from its large 2016/17 harvest.

Since last week's sales failed to rebound, soybean futures continued to decline. January futures were down $0.15 cents, or 1.5%. Cash prices in Toledo and Chicago lost 0.8% and 1.1%, respectively. However, prices in the Gulf were firm, rising just under a penny.

Notably, China backed away from the market. China made net purchases of only 407,100 metric tons. This includes sales to the U.S. of 129,000 metric tons and cancellations of 205,500 tons. From China's perspective, this makes good business sense in my opinion given the higher prices. Given that prices have risen by nearly $0.20 cents at the Gulf during the current week, it will be interesting to see export sales numbers for soybeans next week. Stay tuned.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.