News & Media

Market Briefs for May 25, 2017

Moody's cuts China's credit rating
Moody’s Investors Service cut its rating on China’s debt for the first time since 1989, saying the outlook for its financial strength will worsen. It raised some concern Chinese firms may face higher overseas borrowing costs, forcing them to raise more financing at home and squeeze market liquidity. Moody’s also cited the likelihood of a “material rise” in economy-wide debt and the burden that will place on the state’s finances, while also changing the outlook to stable from negative. China's Ministry of Finance said Moody's downgrade was "absolutely groundless" and the ratings company underestimates the government's ability to deepen reform and boost demand.

Bunge shoots down talks of a merger with Glencore
Earlier this week, reports circulated that Glencore Plc, the Swiss mining and commodities group, had made a takeover approach to U.S. grains trader Bunge Ltd. No such talks are underway, Bunge said in response to the rumors. Glencore also clarified that it had made an informal approach to discuss "a possible consensual business combination."

Impressive Chinese soybean imports continue
China imported 8.015 MMT of soybeans during April, 6.150 MMT of which came from Brazil and 1.777 MMT of which was from the United States. So far this year, China has brought in an impressive 27.537 MMT of soybeans, which is up 18.01 percent from last year at this point. Of that total, the U.S. has sent Beijing 17.206 MMT of soybeans, a 13.79 percent rise from year-ago, while Brazil has exported 8.840 MMT to China, up 26.96 percent from last year at this point.

ADM completes big port expansion in Brazil
The Brazilian unit of Archer Daniels Midland Co. (ADM) recently announced it had completed a 33 percent expansion in its Santos port terminal's export capacity. It will now be able to ship 8 MMT of grain per year. ADM is also analyzing a project to improve rail infrastructure around the port area, in collaboration with other operators. Brazil recently announced it would extend the duration of operating licenses, which has helped attract investment for such plans.

Mexico makes deal to bring in some corn from Brazil
Mexico plans to bring in a record amount of corn from Brazil this year after a livestock delegation secured deals to import corn at lower prices on a trip to the country last week. Alejandro Vazquez, a government official who was part of the delegation, details Mexican livestock companies negotiated directly with suppliers, bypassing traders like Cargill and Louis Dreyfus, which normally arrange shipments. Typically, Mexico bypasses South American corn as U.S. prices are much lower and have shorter shipping times. But the direct deals have made the Brazilian corn much more competitive. Even so, the 300,000 MT of corn Mexico agreed to buy from Brazil represents just a fraction of the 12.75 MMT it imported from the U.S. last year.

AWP up sharply; upland cotton import quota established
The Adjusted World Price (AWP) for cotton shot up to 72.44 cents per pound, effective today, up from 68.69 cents per pound the prior week and highest since the AWP was 73.81 cents per pound the week of April 4, 2014. This ended two weeks of declines in the AWP. Also, USDA announced special import quota #4 for imports of 13,588,518 kilograms (62,411 bales) of upland cotton. The quota will be established as of May 25, 2017, and will apply to upland cotton purchased not later than Aug. 22, 2017, and entered into the U,S. not later than Nov. 20, 2017.

New Details for U.S. Beef Exports to China Expected Soon
New details have emerged on what U.S. beef producers may have to do to export their product to China, but the industry still awaits specifics that will determine the size of the opportunity ahead, the U.S. Meat Export Federation said Tuesday.  Producers would be required to track the locations where cattle raised for beef exported to China are born and slaughtered, under a U.S. proposal accepted by Beijing, Reuters reported Monday, citing the USDA.  The beef exported to China also must be free from residue of beta-agonists, a growth-enhancing feed additive. And beef shipped to China must be from cattle under 30 months of age, a standard designed to reduce the risk of so-called mad cow disease.  Details could be finalized by early June, with shipments starting in July, the report said.

NAFTA Renegotiation Announced
The Trump administration informed Congress last week that it intends to officially begin renegotiating the North American Free Trade Agreement with Mexico and Canada. The much-anticipated notification gives Congress a 90-day window to work with the Office of the U.S. Trade Representative, the Commerce Department and other agencies to help develop priorities in overhauling the pact with two of our largest trading partners.