Two types of market responses:
Emotional – Market has a large spec soy long. Response is negative – easy to say today.
- First: China does not trade corn or wheat – direct impact is none. Only impact to grains is indirectly from soybean values.
- Think of this as an additional freight charge.
- Freight differentials are absorbed in basis not futures.
Old Crop US soy impact:
- US has shipped 25 MMT of 36 MMT we expected to sell to China.
- Balance (11 MMT) can be filled by Brazil and other SA suppliers. Not Argentina this year.
- Brazil has 20 MMT of exports to Non-Chinese destinations that can be shifted to China.
- US will move 11 MMT more soybeans to Non-Chinese destinations.