Fundamentally Speaking

Now that the Phase 1 trade accord between the U.S. and China is close to being signed, traders will be looking for increased Chinese purchases, especially soybeans.

Through the third week of December however the U.S. had only sold 1.071 billion bushels to all destinations. That is the lowest amount as of this point in the marketing year beginning September 1 since the 2011/12 season and the second lowest since the 2008/09 marketing year. The amount shipped at 728.9 million bushels is above the year ago level of 588.7 million, though the second lowest since the 2013/14 season.

This graphic shows U.S. soybean sales and shipments in million bushels as of the third week of December on the left axis while on the right axis shows sales and shipment figures as a percent of the USDA’s December WASDE export projection.

Earlier this month the USDA kept its overseas sales estimate at 1.775 billion bushels, which means that as of the third week of December the U.S. had sold 60.3% of that total. Other than last year’s 57.9%, this is the lowest since 58.8% was sold in the 1998/99 season. The 41.1% shipped as of this point in the marketing year which other than the 31.0% last year is the most sluggish shipped pace since the 2011/12 season.

With the ten-year average shipped and sold pace as of the third week of December at 47.4% and 78.8% respectively it may be that the USDA could pare its export projection in subsequent WASDE reports.

Note that the very slow sales pace last year resulted in final 2018/19 soybean exports coming in at 1.748 billion bushels which is 152 million bushels less than had been projected in the December 2018 WASDE report, the largest December to final figure decline ever posted.

This Phase 1 accord however completely changes the soybean dynamics for supposedly China is supposed to purchase between $40-50 billion worth of U.S. agricultural products and soybeans should figure prominently in those buys once they commence.

(KM)