China is on a roll. Friday marks the ninth straight day USDA has announced new sales of corn, soybeans or wheat to China or unknown destinations. China has made big daily purchases this month, especially of soybeans.
“We are in a timeframe where China is starting to buy hot and heavy, and we’re optimistic they are fulfilling their Phase 1 trade agreement or at least trying,” says Ted Seifried, vice president of Zaner Ag Hedge. “There’s a long way to go yet.”
Pro Farmer says USDA’s daily export sales reporting program on Friday announced private exporters sold 252,000 metric tons of soybeans to unknown destinations as accumulated daily sales during the week pushed the total above required reporting levels.
USDA says 6,000 metric tons were for old-crop delivery and 246,000 metric tons for new-crop delivery.
There could be more export demand from the U.S. to China.
“There’s an area in China starting to flood,” says Seifried. “While it’s not a big soybean producing area, it is a rather large canola producing area. Let’s say they lose a couple of million metric tons of production in canola. How are they going to off-set that? Well, likely, it’s going to be soybeans. Hopefully, it would be from us.”
According to Pro Farmer, China’s import needs for fourth-quarter delivery remain high as feed demand continues to grow, and Brazil will have exhausted exportable supplies. If U.S.-China relations sour further, China may opt to “cut off its nose to spite its face” by pulling back from buying U.S. soybeans even if China knows the U.S. is virtually the only supplier during that timeframe.
Brazil is also dialing in to have a record crop for 2020-2021.
“If you look at China’s purchases from the U.S., they typically ramp up fairly sharply after the first of August,” says Alan Brugler, president of Brugler Marketing and Management. “New crop purchases are very good compared to previous years. Old crop, we were disappointed they didn’t buy more. We know why – they bought record quantities out of Brazil.”
Brugler says it will be promising if China continues to historically buy big after August 1 in addition to what the country has already purchased this marketing year.
Brugler says, “It’s already a four-year high for new crop [purchases as of July 15, 2020]. If we get that normal, seasonal buying, we could see a really strong export program for October,
November and December out of the U.S. to China. That would go a long way to repairing the losses we had last year. It could arguably get us to the Phase 1 commitments, but that’s still down the road.”
Meanwhile, U.S. traders will continue watching to see if rain will occur early next week.