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    The USDA report is bad for the US soybeans to fall. Where will the market go?

    2019-03-14 09:27:20

    World granary

    The US Department of Agriculture (USDA) released the March supply and demand report on March 8 local time. As usual, it did not adjust the US soybean yield estimates, harvested area and production data in the March report. And it lowered the US soybean 2018/19 soybean ending stocks from the estimated 9.1 billion bushels in February to 900 million bushels. Although the US soybean ending stocks are lowered, this estimate is still slightly higher than previous industry expectations. Not only that, but if the USDA's forecast scenario is realized, then the US soybean ending stocks will still hit a record high, and the estimated 900 million bushels will double from the 438 million bushels in the same period last year.

    Schedule: USDA Report Data (excerpt)

     Analysis: The USDA report has made the US soybeans fall, and where will the market go?

    It is not difficult to see from the report that the slight decrease in ending stocks was mainly due to a slight increase of US$10 million bushels in US soybean crush. The US soybean exports remained unchanged in February, at 1.875 billion bushels. Exports are difficult to expand, and it is difficult for US soybean stocks to fall sharply. Although many rounds of trade consultations have been held since China and the United States reached a temporary "close truce" consensus in early December, but there has not been a formal conclusion yet, and African piglets are still spreading in China, the stock of pigs continues to decline, and feed demand is short-term. It is difficult to upgrade. Due to concerns about the demand for the largest importer of soybeans in the United States, the USDA has not adjusted the export data.

    In addition, USDA maintained the Argentine soybean 2018/19 production forecast of 55 million tons unchanged, while reducing the Brazilian soybean production forecast of 500,000 tons to 116.5 million tons, but due to the smaller reduction, this The estimated level is actually slightly higher than the previous market expectations (115.4 million tons). Under this circumstance, the global soybean ending stock estimate was revised up by the USDA from 106.7 million tons to 107.2 million tons, which is also higher than the previous market expectations (106.3 million tons).

    In fact, the relevant data adjustments involved in this supply and demand report are basically bearish, whether the USDA US soybean ending stocks are less than expected, or the announced Brazilian soybean production estimate is slightly higher than expected, leading to the global soybean ending. The stocks followed the upward adjustment, and the market was short. After the announcement of the supply and demand report, CBOT soybean futures under the CME Group fell, and it lost 900 cents in the session, and even fell to the lowest 892.25 cents since November 27. In fact, the CBOT soybean futures price on the day of the announcement of this report did not violate the trend of the same period of the previous year. According to Cofeed's previous statistics, on the day of the USDA March supply and demand report, the CBOT soybean futures price of CME Group has fallen for 7 years in the past 10 years, rising in 3 years, with a falling probability of 70%. The week after the report (including the report announcement day), CBOT Soybean futures prices have fallen for seven years in the past 10 years, rising in three years, with a 70% probability of falling. That is to say, from the law of previous years, after the USDA's March supply and demand report, CBOT soybean futures prices of CME Group fell more and less.

    Figure: US bean chart

     Analysis: The USDA report has made the US soybeans fall, and where will the market go?

    Under the pressure of global soybean supply, the progress of Sino-US trade consultations continues to affect the market. After all, this is directly related to the recovery of huge US soybean exports. Wang Fuwen, deputy minister of the Chinese Ministry of Commerce and deputy representative of China-US trade negotiations, said on March 9 that the heads of state of China and the United States have reached important consensus and determined the principles and directions. The Sino-US economic and trade measures have reached an agreement and canceled all the tariffs imposed on each other. "There is hope". Shortly after, US White House spokesman Sarah Sanders claimed on March 11 that the timing of the trade summit between US President Trump and Chinese President Xi Jinping has not yet been determined. The two countries are still negotiating.

    At 7 o'clock on the morning of March 12, Chinese Vice-President Liu He, the Chinese leader of the China-US Comprehensive Economic Dialogue, made a phone call with US Trade Representative Wright Heze and Finance Minister Mnuchin. The two sides held specific consultations on key issues of the text and confirmed the next. One step work arrangement.

    The US-China trade consultation is still lacking any substantial progress. In addition, AgRural’s latest report said that as of March 7th, Brazilian farmers’ soybean harvesting has been completed 57%, not only higher than 48% in the same period last year. It is also higher than 47% of the five-year average. Brazil's soybean harvesting work is rapidly advancing, which means that as the South American new beans are concentrated and listed, the time is getting closer and closer, and the window period for US soybean exports is getting narrower and narrower. In particular, the export potential of US soybeans to China will be greatly affected. The degree of restrictions, which are all pressured on the US soybean market.

    Figure: Brazil soybean harvest progress chart

     On the whole, in the short-term, in the absence of new speculations, the CBOT soybean futures price is still dominated by weak shocks, and the mainstream fluctuation range is around 880-910 cents. What is the follow-up trend, the progress of the Sino-US trade consultations, if the two sides finally reach an agreement, China will cancel the US soybeans to impose tariffs, the US soybeans are expected to usher in a wave of rebound, but in the context of the global supply pressure, the rebound space should not be excessive fun. View.

    On the whole, in the short-term, in the absence of new speculations, the CBOT soybean futures price is still dominated by weak shocks, and the mainstream fluctuation range is around 880-910 cents. What is the follow-up trend, the progress of the Sino-US trade consultations, if the two sides finally reach an agreement, China will cancel the US soybeans to impose tariffs, the US soybeans are expected to usher in a wave of rebound, but in the context of the global supply pressure, the rebound space should not be excessive fun. View.

    The sales of CME Group's major index products continued to rise during the Asian session, reflecting that the market paradigm is shifting global investors' risk control and arbitrage opportunities to Asia, while Asia's influence on global risk events and regular interest rates and policy activities. It is also increasing.

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    Editor in charge: Dou Xiaowei

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