Free Commentary

By: Dan Hueber-

Far be it from me to ever suggest that anyone in China would do or say anything that would not be completely transparent but it would seem that we have heard potentially conflicting news stories coming from that nation this week.  Yesterday I had reported that the China National Grain and Oils Information Center had increased projections for domestic corn usage by 500k MT to 179.6 MMT for this marketing year.  This is actually a total increase in usage of 21 MMT over last year. At first blush this would appear to be a positive nod towards potential corn imports, particularly in light of the quality issues that we have so frequently heard of concerning their inventories but evidently making such an assumption would be a violation of the old rule about assuming anything.  Today, the Ministry of Agriculture projected another cut in imports of corn, this time of 200k MT for the year, taking it down to 800k MT.  This would now be a reduction from last year of 2.4 MMT, would be the lowest import of corn in a decade and right around one-third of the yearly average for the past decade.  Throwing just a bit more confusion into the mix is the fact that the aforementioned China National Grain and Oils Information Center has projected imports of 2 MMT for the marketing year and the USDA has pegged Chinese corn imports at 3 MMT.  While I recognize that there will often be disagreements between divisions within government agencies and even more so between two complete different governments but when the spread between the highest and lowest is more than 2/3rd, something would appear to be out of wack. Possibly the Ministry of Agriculture really believes that there are truly no quality issues or transportation snarls that will hinder the demand for the existing inventories for corn.  That would sound like a rather large assumption as well.

While the bigger government news of the day will be released later, this is Thursday which means weekly export sales have been published.  For the week ending February 2nd, we sold 971,700 MT of corn or 38.26 million bushels.  While not a bad number per se, it was 15% below last week and 13% below the 4-week average.  Top sales went to Japan at 401.7k MT, followed by unknown destinations with 183.6k and then Mexico purchasing 149.5k.  Beans sales slipped as well as we sold 536,300 MT or 19.71 million bushels.  This was 14% below both last week and the 4-week average.  Here we find top purchases from China with 259.9k MT, France with 132.6k and finally Mexico taking 105.6k. There was also a sale of 107k MT of beans to unknown reported in the daily wire. Wheat sales in turn bounced this week with a total of 527,300 MT or 19.38 million bushels.   This was 17% above last week and 9% above the 4-week average.  Top sales were made with Japan buying 90.6k MT followed by Mexico with 67.3k and the Philippines with 64.6k.

Just a few more hours now until the USDA provides us with the February supply/demand estimates and we shall find out if they can provide us with anything that can help sustain this somewhat surprising but pleasant early 2017 advance.  I would again caution that there would not appear to be potential for the kind of ammunition that could push prices exceedingly higher before spring but every little bit helps, particularly when you are in the insurance pricing period.  So far for the month the average price for December corn has been 3.95 and November soybeans 10.18.