The Hueber Report

Hope springs eternal, at least in the minds of some in the bean market, as thoughts of a return of Chinese buying of U.S. beans has supported this market overnight.  Recognize, this is not due to some special “insider” knowledge about the end of the trade war or a secret source of intelligence in China, but rather a bit of A priori reasoning after the July Chinese import data was released.  For the month, China imported 8.01 MMT of beans, which was down 8% from the 8.70 MMT imported in the month of June. Now, that hardly sounds like rationale to be bullish on beans and would appear to have verified that imports were front-loaded ahead of the imposition of tariffs on July 6^th, but it was enough to spike the Chinese market higher with the largest single-day rally in a decade, which in turn has supported our trade overnight.  Despite what are near record inventories in China, the reasoning evidently is that with South American supplies dwindling into the fall, China will have to return to the U.S. for supplies and seeing that the USDA has already lowered the projection for bean exports, and that has been kneaded into the current price mix, any increase in demand will create a positive influence and the dough will begin to rise once again.  The entire premise may not be all that far-fetched, particularly as global demand is still solid but, like the old story about the optimistic little boy placed in a room of manure happily digging away, confident that there must be a pony somewhere, it would seem to be stretching a bit for a reason to rally. 

Something a bit more concrete is crop updates from Northern Europe, this time from Deutschland. German farm cooperatives now project the total grain crop will tally 36.3 MMT, which would be 20% below last year.  Winter wheat is expected to come in at 19.2 MMT, down 20% and winter rapeseed, 3.47 MMT, down 18.5%.  It will be interesting to see how these figures shape up against the USDA figure come Friday.

Speaking of which, here are trade estimates for the report. Corn production is expected to come in at 14.41 billion bushels from an average yield of 176.25 bpa.  This compares with the official July figures of 14.23 and 174. 2017/18 carryout is expected to fall in at 2.018 billion versus 2.027 last month and the 2018/19 carryout, 1.636 compared with the July estimate of 1.552 billion.  For beans, the average estimate for production stands at 4.416 billion bushels with a yield of 49.7 bpa.  The July estimate was 4.30 billion and 48.5.  Current crop year ending stocks are expected to come in at 462 million versus 465 in July and 18/19 stocks at 643 million compared with 580 million previously.  Total wheat production is projected to fall in at 1.853 billion compared with 1.881 last month and ending stocks are expected to 964 million versus the least estimate of 985 million.  Last but certainly not least, we have estimates for world ending stocks. 2018/19 corn is estimated to fall in around 152 MMT, which would be just a smidge above July but still 20% below the current crop year.  Beans are projected to come in at 99.4 MMT, which would be up from 98.27 last month and 96.02 last year. Finally, in wheat, ending stocks are expected to tally 255.46 MMT. Last month this was pegged at 260.88 and last year came in at 273.5 MMT.  

Realistically, grain and soy markets, while firm, are just treading water in front of the August reports and all sit in short-term overbought positions.  I suspect that unless we do uncover something positive in the reports on Friday, we could be in store for a corrective swing lower into the onset of harvest.