The intentions of China — both as a buyer and a seller — are under close scrutiny this morning, as traders pour over the latest export sales report and news stories from the world's largest country.
USDA confirmed China cancelled 3.4 million bushels of soybeans, one reason net new bookings for the week totaled just 5.7 million bushels, a marketing year low. The government's weekly export sales report also included 8.6 million bushels in cancellations from "unknown destinations," a likely sign buyers are turning to South America for fresh supplies.
Even with the small weekly total, current sales are on track to meet USDA's forecast for the marketing year. But tightening carryout further likely will take a renewed surge of buying from end users nervous about the impact of political unrest in Argentina.
Wheat sales in the latest week also fell below trade expectations at 11.3 million bushels, but remain exceeded the pace forecast by the government for the rest of the marketing year. China was on the list for another 500,000 bushels, but that likely was just completion of an earlier deal.
The wheat market tried to rally last month on ideas drought in one of China's major winter wheat growing areas could force it to import more. However, recent rains have eased dry weather concerns, and government officials say they don't expect a big import program. China typically imports a little high quality wheat every year, but big volumes are rare. Most of this week's sales were small deals to regular customers in the Americas and Asia.
China's most recent statements in the corn market are stirring a little more excitement. Government officials this week allocated $10 billion more to boost commodity reserves and to support local prices for farmers. That's likely to limit any exports from China's massive 2008 crop, which could eventually turn Asian buyers back to the U.S.
The weekly total of 31.2 million bushels beat trade guesses, with South Korea the leading buyer. Japan remains a very slow buyer this year, one reason sales have lagged.
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