Here we are. Waiting for China to buy soybeans and operating on rumors. Could this market environment spark a rally?
The “Buy the rumor, sell the fact,” advice has probably never been more true for many US farmers than it is right now. And it looks like this type of market environment might be around awhile, says Kevin Van Trump of Corn & Soybean Digest. As of mid-December, the Chinese had purchased only 3 MMT’s of soybeans. Trade wants more. Before it gets bullish on the balance sheet, it needs to approach 6-8 MMT’s.
Here’s the December pattern: When we heard rumors of more Chinese buying, we rallied. Then the official numbers from the USDA would come in, and trade would sell off in disappointment.
Not Enough for Movement
Rumors are what we’re going on these days, says Ken Anderson of Brownfield Ag News. He spoke with Arlan Suderman, the chief commodities economist with INTL FCStone about the soybeans the Chinese have said they’d buy when the “trade truce” was announced. It was supposed to be an additional 2 MMT’s.
“At this point, that probably would not be enough to really materially move the market,” Suderman says. “It’s certainly positive, but not enough to make a big dent, with the expectation that the bulk of China’s purchases are probably going to go south of the Equator here in the weeks ahead with the new crop harvest already started in parts of Brazil.”
Even if China follows through and buys what they said they would, it’s probably not going to be enough to move the market significantly.
Ted Seifried of AgWeb also wonders if a Chinese soybean purchase would even make a difference at this point. We’ve all been watching exports to China very closely, just waiting for them to jump back in.
Then the government shut down. Along with that, the USDA suspended reports on daily and weekly exports. How are farmers to know what’s going on? How will this affect soybean markets?
Since the supposed “trade truce” between the US and China, they’ve only bought about 3 MMT’s. That’s not enough to really help the soybean balance sheet. More purchases are anticipated this month, but how will we know without the USDA reports?
We can look to basis at the ports, but it will be hard to know the destination. Mostly, we’ve got rumors that are tough to confirm.
Anything is Possible
It’s possible that this environment could be beneficial for soybean markets. The market may get excited about rumors that we can’t disprove.
However, it’s much more likely to be harmful. We’ve mostly been skeptical about China coming back to US markets. Without accurate numbers from the USDA, it’s going to be difficult to quell the skepticism. At this point, more information is what we really need.
Right now, our sources seem to have a very cautious optimism. Anything can happen, and it’s possible that all of the rumors and uncertainty can drive the markets. However, it would be better to have the data and the USDA reports. It’s all pretty grim. Even if the Chinese end up following through and buy more soybeans, there might not be much of a blip.