Grains –
Not sure what to say after yesterday’s session. We knew the market would be under pressure following the news from Brazil but I’ll have to admit I didn’t expect a 30 cent decline yesterday. There was big pricing in Brazil yesterday, but estimates vary depending on who you ask. Some will say “only” 2 mmt of soybean pricing was seen while others would ballpark 3-4 mmt. Hard to know right now, and I’m not really sure that it matters.
First keep in mind that the lack of farmer selling is not the same as lack of movement of Brazilian supplies. The soybeans have certainly been moving well, as you can see from the chart of export shipments shown here. Brazilian export totals have set new highs in each month this year so far. What we should be saying rather than no farmer selling is no farmer pricing has been seen. The pricing of a lot of previously moved soybeans is a factor that is going to weigh on the market for a bit here. But, make no mistake, the soybeans have been and likely will continue to flow out of Brazil.
Keep in mind this strong movement really implies impressive global soybean demand. The other chart attached here shows a recent breakdown of combined US, Brazil, and Argentine soybean exports to the entire world. Again we’re setting new highs each month this year, though I have to admit that the April figure is an unofficial estimate at this point. After the initial weakness here I’d have to think the focus will gradually shift back to demand (or US crop prospects).
That said, the key item to watch right now will likely prove to be Brazilian export premiums. When you start to see some sort of stability develop there, then we might have seen this pricing run its course. Note the chart here showing June premiums, which had been creeping steadily higher and allowing the US to gain competitiveness for additional old crop exports. That will not likely be the case anymore…we’ll see.
Keep in mind the situation in Argentina is a bit different. There the currency has remained weak, but farmers are more interested in selling/moving corn right now. Soybeans in Argentina are still heavily taxed. The administration has promised to eventually lower taxes, and that essentially encourages hoarding of some degree.
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