Soybeans

Will lower crude oil prices increase soybean sales to China?

Soybean bulls were happy to see better than expected weekly export sales to China. The bears, however, wonder if these sales will really equate into more U.S. shipments?

Obviously we're starting to see the Chinese book more South American shipments, from Brazil and now Argentina. The bears are also wondering if the pace of Chinese imports can continue, especially considering the Chinese crush margins are much weaker and meal prices are extremely low?

My question is, how do we know longer-term Chinese demand doesn't aggressively increase on the heels of a rising U.S. dollar and falling crude oil prices? Several analysst are starting to tell me the current environment and shift in landscape could end up being extremely bullish the Chinese economy. An economy that seems to thrive on cheap energy and increased exports. If this plays itself out, I suspect we could end up seeing Chinese economic growth return back to double digit gains? Keep in mind this is a longer-term macro type theory or perspective, so don't expect any massive change or jump in prices nearby.

In fact with the lack of headlines, no significant weather story, talk of another year of record acreage in the U.S., and record production being harvested in South America, it's tough to envision prices nearby doing much but moving lower. As I've mentioned, there are several extremely sharp analysts in the industry who are projecting new-crop ending stocks will jump up to  near 700 million bushels (possibly higher if we have another 47-bushel type yield) and prices could potentially fall to sub-$7.00 following harvest.

From a spec perspective, I continue to believe the herd has taken on a "sell the rallies" type mentality. This will obviously keep a lid on prices and make getting back above $10 near-term a tough task. Similar to corn, those producers still holding old-crop bushels need to give careful consideration to the "time-frame" in which they can continue to hold. Then ask yourself if that's enough time to create a "weather" story or bullish scenario needed to get that price rally you've been waiting for?  

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