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USDA Report Preview: Will China’s Cancellation of Soybeans Show Up?

On Thursday, USDA will release their December World Agricultural Supply and Demand Estimates (WASDE) and Crop Production reports. Typically that report isn’t a market mover, but according to Brian Basting of Advance Trading, 2020 hasn’t been typical either.

“Be aware and prepared for the report,” he said. “I think this report will not change the U.S. corn and soybean yield estimate. We will get another update of U.S. corn and soybean yields in January; however, they can change the world numbers. For example, the Ukraine corn estimate or Brazil or Argentina corn or soybean estimate, so the market will be looking for that.

Specifically, Basting expects USDA to take a closer look at U.S. soybean export estimates.

“We’ve really finished the first quarter of the marketing year for soybeans and was at record export pace,” said Basting. “Based on early projections, we’re awaiting final census numbers, but probably a little over 1 billion bushels. That and in conjunction with the unshipped sales on the books, one could build the case that the export estimate from USDA is still a bit on the conservative side in November.”

Last week, China announced cancellations of soybeans from the U.S. Basting said that could implicitly show up in this report by what USDA does with the annual estimate.

“If the USDA gives an unchanged number, one could read between the lines and say that the USDA is concerned about the potential for additional cancellations from China,” he said. “Crush margins in China are deteriorating, so the profitability associated with importing beans and crushing those beans in China is deteriorating.”

He added that there’s still a tremendous amount of soybeans on the books headed to China. He said China continues to be a huge component in market volatility and will be until those sales are completed.