Agriculturals markets have received a triple whammy on the fundamentals front so far this week. Fresh government data sets from both the US and Brazil have confirmed bumper harvest prospects for this year and next year, at the same time as China’s third devaluation of its currency in as many days has trained a spotlight on the country’s ability to maintain its appetite for imports as indirect signs of an economic slowdown mount. Export downgrades were a key component in USDA’s more than 10% upgrade to its expectations for US end stocks of soybeans in the 2015/2016 marketing year, with reduced exports also a factor in USDA’s 7% upgrade to expected US corn ending stocks.
Rampant growth in Brazilian soybean exports has had a marked impact on US sales to China since the start of this year after a record-breaking 2014 for US exporters. The first six months of this year saw US sales to China plummet to 8mn t from 9.3mn t in the year-ago period, when US sales went on to break 30mn t for the first time after the seasonal fourth quarter sales upswing. Net sales in the current marketing year fell to a marketing year low of -447,000t in the las week of July, although new crop year sales were broadly in line with a year earlier at just over 1mn t. China has accounted for roughly 60% of US overseas soybean sales over the past five years, with market share dropping to 46% in the first half of 2015.
A sharp bounce in Chinese pork prices through the first half of this year as pork price inflation jumped to its highest levels since 2012 offers a glimmer of hope to Americas soybean sellers, raising the prospects of higher overseas or domestic demand for high protein feed. USDA marked total soybean meal use up 1.1% in its monthly WASDE report, with feed grain usage and export projections also hiked.