Market Matters Blog

One Cancellation Down, How Many More to Come?

China cancelled a soybean shipment this morning, and as DTN analyst Todd Hultman told me, it's the first time in a long time the sell-side of the soybean market has had much to talk about.

Everyone expects cancellations. The lingering question is, how much will China cancel? This morning, China canceled 245,000 metric tons, about 9 million bushels. It's not their first cancellation of late, but it's different because it wasn't offset by news of a new purchase.

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Export sales are roughly 90 mb more than USDA's projected export demand number of 1.51 billion bushels. One of the newsletters I read pointed out that 3 million metric tons of soybeans that have been marked "sold" still need to be shipped. Of that, 2.6 mmt are marked for China and another 500,000 mt have been sold to "Unknown," which most people assume means China.

There's room for China to cancel more shipments from the U.S. And after last year's port delays in Brazil and this year's political fiasco in Argentina, who could blame them for being cautious.

"Outguessing China's actual need is tough, but their demand looks legitimate so far, so I do not expect a lot more --- 50 mb or less?" Hultman said. "Old-crop supplies are still tight, even if 80 mb more are cancelled."

While China's appetite appears to be strong, there are some reasons for concern. DTN China Correspondent Lin Tan has a story on the impact of the H7N9 flu virus on the country's poultry industry (look for it in the news segment Wednesday or Thursday). He says it's having a big impact on the feed industry.

"Feed demand down 25% in the first two month of 2014. Soybean crushing margin is negative now. Soybean crushing companies have a big storage of meals. The crushing industry is expecting to process less beans in the following months. We also see the stock at the import ports getting higher: It was 5.2 mmt in Feb., will get to 5.6 mmt this month and is expected to be 6.2 mmt next month, according to local market players."

(CZ)

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JONATHAN HOOK
3/7/2014 | 5:36 AM CST
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 !
FRANK FULWIDER
3/6/2014 | 7:13 AM CST
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.