'Massive' sale to China

[aaron4020]

I'd agree that their economic policy wasn't devised simply to lower the price of soybeans. I also think it would be naive to assume that they didn't know what effect that policy most likely would have on soybean prices and time some of their purchases accordingly.

Aaron

[idalivered]

Is it possible that they are trying to lock up supply ahead of any further tensions with North Korea and the rest of east asia? they might not like it, but will back them economically and militarily. (kinda like us and israel  now that i think about it)

[smokeyjay]

Very interesting.  I just received a copy of a newswire feed from a credible source and have included it here in this post...  Makes one wonder just how far the markets might go.

11/23 21:04 CST China sees big corn shortage, urges more bank aid

11-23-2010 22:04 China sees big corn shortage, urges more bank aid

    BEIJING, Nov 24 (Reuters) - China's Banking Regulatory

Commission (CBRC) has called on banks to urgently offer special

support to the agriculture sector in the face of severe shortages

of corn, cotton and sugar, among other crops.

    Local media reported that the notice, issued on Monday,

marked the first official admission that the country faces corn

shortages, following repeated assurances from the government

grain authority that the country has ample reserves.

    Special financial support should be offered to those involved

in production, processing and circulation of some farm products

to counteract looming shortages for short-grain rice, corn,

vegetables, cotton, sugar and other crops, the commission said on

its web site (www.cbrc.gov.cn).

    CBRC is among several Chinese authorities that have published

detailed measures as part of efforts to combat rising prices.

Annual inflation rose to a 25-month high in October, largely

driven by food price rises.

    The State Administration of Grain last week said it would

boost state sales of vegetable oils and soy on top of weekly

sales of corn, rice and wheat, but many buyers of corn have been

restricted from weekly bidding. 

    The regulator urged banks to boost lending to

agriculture-related industries as the top priority to help

stabilise farm prices.

    Domestic futures prices of cotton, sugar

and corn frequently hit record high levels this month

before the central bank moved to tighten credit inflows to the

commodity markets by raising banks' reserve ratio twice this

month, in part to reduce speculative capital.

    (Reporting by Niu Shuping and Tom Miles; Editing by Ken

Wills)

    ((niu.shuping@thomsonreuters.com; +86 10 6627-1210; Reuters

Messaging: niu.shuping.thomsonreuters.com@reuters.net))

  ((If you have a query or comment on this story, send an email

to news.feedback.asia@thomsonreuters.com)

[Palouser]

I don't buy the 'shortage' idea. But, one needs to define 'shortage'. China has large reserves of food commodities. However, the inflation psychology of the country encourages hoarding as a form of speculation - as long as the authorities don't catch you - since there are laws against 'hoarding', an arbitrary definition depending on the mood of the government. This is a common situation in India too.

Again, the reserves are supposed to be a hedge against true crop failures in the future, since a needy China going on to the global markets in a sudden surge of buying would play havoc with the markets. If China uses reserves to knock down prices it will almost immediately replace with new stocks.

In order to maintain equilibrium China always has a steady stream of food and other resources at sea and loading, along with ongoing purchases. These chains will not be broken willingly - another reason for having large inventories. China would NOT react well to a perception of being threatened or strong armed in ANY WAY in regards to supplies. The reaction would not be pretty.

[kraft-t]

I don't suppose there is any regulation in speculation in physical commodities but it hardly seems right to have contracts for physical grains only to cancel the orders. China could be an elephant in the china shop if they choose to swing their weight around within the market.

[smokeyjay]

That may well be, but what can China do short of what they've already done?  SA and NA are the grain bins of the world as it is, so, are they gonna p*ss them off with a credible threat?  They need the grain bins as much as we need them.  Counter that with index funds and you've got a market free-for-all.

[smokeyjay]

Yeah, but how many times will the shop keepers allow the elephant to enter the shop?  Swing the weight around one too many times, the market players decides to let the hungry come to them and the chinese consumer will give their government more important things to worry about.

[Artifice]

Looks very toppy. We have lots of beans, exports are expected.

-7 in nite trade.

I suggest:  help supply China's order by selling a % of your bean crop.

Artifice

[Artifice]

The down turn in prices resulted from  BUBBLE mkt conditions, one day  bubbls  just end.

Artifice 

[dan-the-farmer]

I really wonder how much of the buying in the grain futures during this sell off has been Chinese.  I was a commodity broker for 25 years.  During that time I delat with a number of Chinese business men and they can teach Donald Trump how to make money. 

Their infaltion problem is food costs due to supply not being large enough to meet demand.  So why would they reduce imports which would drive prices up faster wehn they have all that worthless American money they want to spend?  If they raise interest rates the get the fast money they do not want flooding their banks which would increase inflation.  so increasing interest rates is out of the question.   if they reduce manufacturing they would increase inflation, so they have to follow a policy that does not do that.  they have done the only thing they can which is to increase reserves the bank have to hold.  What they have to do is flood the country with food to hold the prices down.  Look at the prices that corn and soybeans are trading on their futures vs our export price and tell me what they are going to do.  to me it is a clear case of our American stupidity driving the market down and giving all end user an early Christmas present.  If they did not cover their needs, Then it will be their banks selling them out. 

Hope you all had a great Thanksgiving.

Daniel