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Senior Advisor

Interesting rumor regarding Chinese corn/bean buying

The rumor is that China is buying in the US and taking advantage of the gov shutdown because the purchases are not being reported to the market.

 

I guess that would imply, if true, that they could theoretically be buying in large amounts to take care of known future needs without having to worry about the market reacting with price rises right away..

 

There is another implication here that directly contradicts those who think the market might be better off w/o government reporting. The farmer would be the last to know - just like in '73. The idea that there isn't value to a third party requiring reporting is absolutely and completely erroneous and naive. Wishful thinking. Farmers are definitely at a disadvantage right now!

 

I would also be curious if wheat could be involved as I don't think the big buying by Brazil of US supplies is totally responsible for relative strength of wheat. But, there is no way to evaluate that right now.

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Senior Advisor

PS

I'll credit this rumor to Louise Gartner who has a commentary on Ag Online.

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Veteran Advisor

Re: Interesting rumor regarding Chinese corn/bean buying

Palouser,

thanks for the info!

was gov't shut down in 1973?......is there a reference to the Russian embargo here or simply the ability of big business to conduct a lot "behind the scenes" thus potentially causing a build up of some unforseen market forces?

 

appreciate it.

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Honored Advisor

Re: Interesting rumor regarding Chinese corn/bean buying

You know, it just occurred to me that this shutdown might be for just such purposes...to let some transactions go undetected, at least until it's too late.  It makes so sense otherwise, and just might be political suicide for some of the players. 

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Honored Advisor

Re: Interesting rumor regarding Chinese corn/bean buying

What are the chances of information being unavailable until sales are made, then reported in time to raise the harvest price before the insurance price is set?

Will look very convenient -------------- but I would think our #1 lender would benefit well if that rumor is true.

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Veteran Advisor

Re: Interesting rumor regarding Chinese corn/bean buying

 

That is on my Christmas list: 

 

An International Grain Broker with lose lips.

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Senior Advisor

Re: Interesting rumor regarding Chinese corn/bean buying

There was no grain export sales reporting  in 1973. That was a reform enacted BECAUSE of 1973.

 

There were a number of consequences of 'being in the dark' at that time. Probably very sketchy weather data for the Soviet Union (they lost their crops to cold and rain - a complete disaster - and  nobody knew about it), little ability to travel in the Soviet Union and so on. The Soviet buying teams came to America and fanned out and talked simultaneously to many grain companies. The buy was in before even they figured out what the extent. The grain companies then kept their information to themselves and got suppliers to contract with them knowing when crunch time came sales prices might be sky high and the suppliers might not be able to fill the congtracts w/o buying higher priced grain. The suppliers thought this was a great deal - until the situation became apparent and then they were caught.

 

There was havoc across the board and many outfits went under and cleared the decks for the big boys. There was some knowledge/speculation the Soviet Union sold some of what they bought to others after the price skyrocketed bu changing and it helped finance the whole operation.

 

I think now all export sales over 100,000 tns have to be reported in 24 hrs and smaller sales within a week. I think there are more provisions than that but that's the basic principle.

 

Let it be a lesson. No third party information and farmers are at a real disadvantage. Even with public information available from the USDA importers/exporters try and manipulate the market with phantom ships and reported sales.

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Senior Advisor

Re: Interesting rumor regarding Chinese corn/bean buying

I think the shutdown artists have bigger fish to fry than some grain deals. Well, they THINK they have bigger fish to fry.

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Honored Advisor

Re: Interesting rumor regarding Chinese corn/bean buying

It wasn't fully  quite that sneaky since the US government financed the grain purchase.  But that also was largely kept from the public until the investigation.  One of those events that remind us that political goals often trump public concern.

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Senior Advisor

Re: Interesting rumor regarding Chinese corn/bean buying

The totality of the wheat purchases and price effect weren't necessarily known by the government initially.

 

The government had a subsidy directly to the exporters to help finance exports.

 

The Soviets came back in '77 and did it again though some of the subsidies had been removed.

 

The farmers weren't informed by the private companies OR the government until it was too late.

 

http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CC8QFjAB&url=http%3A%2F%2Fresear...