Market Matters Blog
Katie Micik DTN Markets Editor

Wednesday 03/05/14

One Cancellation Down, How Many More to Come?
Cancellations are expected. They just seem to be a little late to the party this year, generating questions about how much of the U.S. crop China will actually buy.[Read Full Blog Post]
Posted at 11:57AM CST 03/05/14 by Katie Micik | Post a Comment
Comments (5)
How can china just cancel a shipment? If I buy grain for future delivery I have to take it or at leased pay the difference in price.
Posted by FRANK FULWIDER at 7:13AM CST 03/06/14
That's a really good question Frank, and unfortunately there's not a very good answer. Here's what I've gathered from conversations with traders who work with China, academics and few Chinese traders I've met. One of the first things I'm always told is that there's some kind of an "out" clause in the contract, and China most likely pays a penalty fee. Sometimes, there's a clause that allows them to shift into a contract with a different origin. It shows up here as a cancellation, but for the grain company, it's still a sale. Also, one of the reasons why Chinese companies seem to cancel more than other countries is that they're not allowed to hedge on CBOT. They have the Dalian Exchange, but it's not nearly as liquid or true to global prices and doesn't quite work for them. The lack of hedging ability means makes them more willing to cancel a contract and pay a penalty fee if the market price goes down -- they still end up ahead. I wish I had a better answer for you, but this is about all the information I've been able to gather, and no one will go on the record either.
Posted by KATIE MICIK at 9:10AM CST 03/06/14
As a answer to your questions of how much of the US soybean crop will the Chinese buy, from the the way the markets are acting it looks like to me; the answer is All the Rest of it !
Posted by JONATHAN HOOK at 5:36AM CST 03/07/14
Hi Katie - Frank . Puede suceder que el exportador 'ABC" reemplace una venta de poroto a China con embarque en el Golfo por otra con embarque en Brazil / Argentina con una 'prima de descuento"en el precio que compensa la multa por anular la compra a USA saludos
Posted by Unknown at 9:25AM CDT 03/10/14
Thank you unknown commenter. My Spanish is rusty, but with the help of Google translate, here's what I think you're saying: It may be that the 'ABC' exporters of beans replace a sale to China from the Gulf with a shipment from Brazil/Argentina with a "premium discount" on the price that compensates for the canceled the purchase from the USA.
Posted by KATIE MICIK at 4:17PM CDT 03/11/14
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