The Hueber Report

A glimpse at the overall price action in the soy and grain trade would tell us that many have given up hope of any resolution in the trade spat between the U.S. and China but a remnant of the faithful remain, ready to pounce on any encouraging signs that the war could be waning.  Overnight they received just this kind of news needed to lift their spirits, as well as prices, as stories began to circulate that peace talks are in the works. While I have not seen a specific date, sometime yet late this month the vice commerce minister from China, Wang Shouwen will lead a delegation to the US to begin the discussion.  Encouraging news indeed and helped to stimulate the round of optimism we have in prices this morning.

Maybe coincidental, but it is interesting that this hit the news at the same time there has been a change in the status of the Peak Pegasus.  No, I am not referring to a mythical winged stallion, but rather the ship loaded with U.S. soybeans that has been sitting offshore in China for over a month.  If you recall, this ship became a bit of a sensation in China as it was cruising as fast as it could to beat the July 6^thtariff date to reach port, but just missed the cutoff.  These beans had been purchased by Sinograin and the failure to get to port on time meant an additional 6 million dollars in tariffs.  If my math is correct, that would work out to be around $2.30 per bushel. Ouch. Well, as I commented the Peak Pegasus has been idling offshore since early July but has not been pushed into a berth and the unloading process begun.  Why the change of heart? First of all, no one has even suggested that China can source all of their beans from other suppliers, i.e., Brazil and in fact, with harvest now complete there and a steady stream of shipments, the South American bins are beginning to be pretty well coned down. Just as important, you can well suspect that economics are coming into play. U.S. beans are currently trading at around a 20% discount to Brazil, which would likely make replacing these 70,000 MT not very economically feasible.  We should not take too much comfort in the situation as China has already pledged to do its utmost to purchase as much product from others, which short and long-term is not a good thing for U.S. bean producers. Regardless, the USDA has already factored this into the supply/demand equation, and by extension, markets have built it into the price so any improvement in demand should translate into an improvement in price.  So, here’s to Pegasus.  May he take flights across the great seas once again and ideally, load up another cargo of U.S. beans.  

There have been numerous rumors that China has returned to the U.S. soy market for the upcoming crop year but if they have, they are trying to be cagey about it.  For the week ending August 9^th, we find that for the 2018/19 crop year we sold 571,600 MT or 21 million bushels.  By no means are these “knock your socks off” kind of sales but respectable nevertheless.  The top purchasers were Unknown with 373.2k MT, followed by Mexico at 102k and then Turkey with 30k.  For the current crop year sales were just 133,400 MT or 4.9 million bushels.  This was 68% below last week and 52% below the 4-week average, but at least they were still in the positive column.  Old crop corn sales were not stunning either, coming in at 339,000 MT or 13.35 million bushels.  This was 39% below last week and 26% under the 4-week average.  New crop sales were solid though with 1,044,800 MT or 41.14 million bushels.  Here as well Unknown was on the top of the list with 320k MT, followed by Mexico with 298.1k and then South Korea at 126k.  The top award this week though goes to wheat, where we recorded a marketing year high of 803,000 MT or 29.51 million bushels.  Top sales went to Mexico with 247,800 MT followed by the Philippines with 177.9k and then Nigeria taking 140k.

Finally, today we also saw good export sales announced in the daily system.  Mexico purchased 154,404 MT of beans for next year, and Iraq was in for 200,000 MT of hard red winter wheat.   Some people know a bargain when they see it.