Farmers are always worrying about risk management, but end users must also hedge their exposure. Today's Export Sales report, which features huge new crop soybean deals, shows how foreign customers used last week's price break to guard against a bullish USDA report.
Net old crop sales of both corn and soybeans were negative, as the end of the 2012 marketing year winds down in a couple of weeks. But new crop, especially soybeans, was flying off the shelves. November futures made new lows for the year last week, while December corn sunk to its lowest level in almost three years before USDA surprised the trade with relatively low production estimates.
New crop sales totaled 69.2 million bushels, one of the largest weeks for sales of the next year's crop in history. USDA had previously announced 43.5 million bushels of the deals, under its daily reporting system for large purchases, so the bigger number was something of a surprise. November futures firmed overnight gains as a result.
China was the big buyer, taking 49 million bushels of the total, with "unknown destinations" accounting for most of the remaining business.
Total new crop sales ahead of the Sept. 1 start of the 2013 marketing year are an all-time record at 658 million, almost half the total forecast for the entire marketing year by USDA.
By contrast, the corn deals so far aren't quite that good, but are still running at the best level since the 1995-95 crop year. New crop sales totaled 32.9 million in the latest week, well above trade guesses. Mexico and unknown destinations made up most of the business.
After a series of good reports, wheat sales were a bit disappointing at 18.2 million bushels. That was below trade guesses, and the lowest total in seven weeks. Still, sales beat the rate forecast by USDA for the rest of the marketing year, and shipments were strong at 26.1 million bushels.
Brazil continues to be a big buyer of U.S. hard red winter wheat, replacing supplies lost from neighboring Argentina. Production in Brazil was also hurt by frost in recent weeks.
Still, the big winner may have been white wheat, which saw new sales of 5.75 million bushels. Regular Asian customers, including Japan, are buying again, after the GMO wheat found in a field in Oregon proved to be a one-off occurrence.