Looking out a few months to the start of the U.S. planting season the USDA reports there will be some soybean acres switched over to wheat which would pull some potential supply out of the equation.
For now long ain't wrong as they used to say in the pits, with a dynamic tension setting up under seemingly sideways pricing. The last time we saw this pattern, Nov. 30, patient reader was treated to this comment:
...We have that series of higher lows starting with the September bottom but not (yet) higher highs.Here's a year of beans via FinViz:
If one can ascribe animal spirits to lines-on-chart I'd say soybeans are looking for a reason to trade higher.
Great. I am now anthropomorphizing inanimate objects...
Prices gapped up and here we are. Same sideways action, same uncertainty and same set-up. 915.50 last, down 1.25.
And the headline story via gCaptain, December 6:
China may be girding itself to buy more U.S. gas and soybeans amid easing trade tensions, but the sums just don’t add up right now....MORE
American supplies would be uncompetitive or unneeded when shipped to China, based on current prices, shipping costs and other variables. So any resumption in purchases by the world’s biggest gas importer and America’s top soy buyer is unlikely to be for economic reasons and may be a political gesture by Beijing to smooth relations with Washington.
President Donald Trump’s claim this week, following a meeting with his counterpart Xi Jinping, that China would boost purchases was welcome news for U.S. farmers and energy executives, who’ve seen their sales to the Asian nation virtually vanish. Chinese officials have been told to take necessary steps to rekindle trade, though it isn’t clear if its recent import-stifling retaliatory tariffs would be cut.
But China may not have much appetite for any additional gas right now beyond its baseload, long-term contracted volumes as its fuel tanks remain near capacity and amid forecasts for an unseasonably warm winter, according to traders surveyed by Bloomberg. And the best time of year to sell American soybeans to China has passed as South American harvests approach, according to Cargill Inc., one of the world’s top agricultural commodity traders.
North Asia’s gas buyers, who are well stocked for winter, are awaiting colder weather before increasing spot purchases, traders have told Bloomberg over the past month. A glut of supply and lower crude oil prices, to which most LNG shipments are priced, have pushed the benchmark Japan/Korea LNG Marker to the lowest since July, a sign of weakening demand.
And even if China were to seek a short-term supply deal, it would be easier to turn to Australia or Malaysia. Oil-linked cargoes from those suppliers are currently cheaper than U.S. shipments, which are priced off the Henry Hub marker that’s hovering near a 5-year high, according to Bloomberg calculations.
“High shipping rates, a spike in Henry Hub-sourced LNG prices and a fall in Asian oil-linked benchmarks make it far less attractive to bring in U.S. LNG to China — for now,” said Fauziah Marzuki, a Bloomberg NEF analyst in Singapore. “Atlantic-basin supply will likely stay in the Atlantic.”
To be sure, if there was a directive to take more U.S. gas, it would be possible for Chinese buyers to swap cargoes they planned under existing long-term contracts with U.S. shipments as “market liquidity easily enables that,” said Saul Kavonic, an analyst at Credit Suisse Group AG. “The key question is regarding Chinese buyers appetite to underpin long-term U.S. LNG contracts for new projects, which they may still be hesitant to do until the truce proves sustaining.”
Trade Tumble
China’s most-recent trade data showed it bought no LNG from the U.S. in October, following Beijing’s move to impose a retaliatory 10 percent tariff. (The nation imported at least one U.S. cargo in November, according to vessel-tracking data compiled by Bloomberg, and there’s another still en route.) Meanwhile, soybean imports from the U.S. slumped 95 percent from a year earlier, amid a 25 percent tariff, and were replaced by a surge in Brazilian shipments.
It wouldn’t make much economic sense for China to boost American soybean imports now. U.S. soybeans for January were quoted at $392 a ton at Chinese ports Dec. 3, with freight and insurance costs included but without the 25 percent tariff, while Brazilian supply was a close $407, the China National Grain & Oils Information Center said in a report this week. The premium for Brazilian beans over the U.S. has slumped, partly because supplies from the new Brazilian crop are increasing...
