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Volatile Markets Ahead, Waiting for More Soybean Sales

Investors look for more sales announcements.

Beans ended the week on a negative note losing 6½ cents, despite the USDA’s confirmation of the sale of 300,000 tons of beans to China and a 130,000-ton sale to an unknown buyer.

The fact is, today’s confirmed sale to China combined with the 1.1-mmt announced sale earlier in the week is not near the hyped 5 to 10 mmt that the trade has been talking about since Presidents Trump and XI cut the trade negotiations deal two weeks back.

Hopefully, we will see more sales announcements in the next few weeks as there continue to be reports that they will be in for at least another 1 to 2 mmt and hopefully more by the time there are done buying.

We need to see China purchase a minimum 7 mmt to offset the lower-than-normal year-to-date sales pace we have seen so far. With the absence of China, export sales now total 48% of USDA’s goal, which is far under the 75% five-year average. Without the Chinese buying, we could miss the USDA’s export goal by about 513 million bushels.

Assuming we get some of Brazil’s customers in the spring, and the seasonal drop is not as bad as history suggests, we compute we could miss the USDA’s goal by about 200 to 300 million bushels without China buys.

Look for volatile trade to continue as trade reacts to every headline and rumor on how many beans China is buying. With the U.S. and world stocks to use at record high, we view rallies as opportunities to offload old-crop beans and hedge new crop.

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