U.S. grains: Soy climbs on hopes for China buying

(Scott Bauer photo courtesy ARS/USDA)

Chicago | Reuters — U.S. soybean futures closed higher on Tuesday as traders anticipated potential Chinese purchases of U.S. agricultural products, and shrugged off a bearish monthly global soy inventories report from the U.S. Department of Agriculture.

Corn firmed, led by soybeans, but wheat futures fell after USDA raised its forecasts of U.S. and global wheat ending stocks more than most analysts expected.

USDA also raised its forecast of world 2018-19 soy ending stocks to 115.33 million tonnes, topping a range of estimates.

Chicago Board of Trade (CBOT) January soybeans settled up 5-1/4 cents at $9.15 per bushel, but stayed within a trading range established in recent days (all figures US$). March corn added 3/4 cent to end at $3.84-3/4 a bushel.

“All indications seem to be that you should see an announcement here at least for China to buy enough beans to replenish reserves,” said Terry Linn, analyst with Linn + Associates, a Chicago brokerage.

“The market is terrified right now,” Linn said. “How can you sell beans when you’ve got this trade announcement coming out at any time?”

U.S. soybean exports to China, by far the world’s largest buyer, collapsed after China slapped tariffs on U.S. supplies as the trade war between the two countries heated up.

China has agreed to cut tariffs on U.S.-built cars and auto parts to 15 per cent from the current 40 per cent, a Trump administration official said Tuesday, setting the stage for a new talks aimed at easing the bitter trade war between the world’s two largest economies.

A decline in Brazilian soy export prices in recent weeks and falling Chinese domestic soy prices hint at prospects for a package of purchases of U.S. agricultural goods, Linn said.

U.S. President Donald Trump and China President Xi Jinping agreed at a Dec. 1 meeting in Argentina to a truce that delayed a planned Jan. 1 U.S. increase of tariffs to 25 per cent from 10 per cent on $200 billion worth of Chinese goods.

“The markets are still waiting for concrete evidence that China is again buying U.S. soybeans,” said Matt Ammermann, commodity risk manager with INTL FCStone. “There were reports that China may buy five million tonnes of U.S. agricultural products but real signs of purchases are lacking.”

CBOT wheat futures declined, with the March contract finishing down 4-1/4 cents at $5.21 a bushel.

Wheat was pressured after USDA, in its monthly supply/demand (WASDE) report, raised its forecast of U.S. 2018-19 wheat ending stocks to 974 million bushels from 949 million in November, above the average trade expectation for 956 million bushels.

The larger stockpile expected at the end of the marketing year reflected a cut in the government’s forecast of U.S. wheat exports.

“USDA taking the wheat exports down by 25 million bushels basically removes hope that the U.S. will regain a considerable amount of market share in the second half of the crop year,” said Terry Reilly, senior analyst with Futures International.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago; additional reporting by Michael Hogan in Hamburg.

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