China loses the Pop

Good Day,

The big emotions of Fear, Hope and Anticipation appear to have been traded out of the grain markets for now.  The leftover trade from a bearish crop report last Friday was nibbled on but far from enjoyed by either bear or bull.  While a significant rally seems unlikely in the short term, moves lower will be a slow grind where each step makes a bear question whether he’s turning into a hog. 

A flash sale of 297,000 tonnes of U.S. soybeans for delivery to China in 2023/24 was announced today by the USDA.  Admittedly you don’t know whether these beans were sold yesterday or 2 months ago, but the timing of it is peculiar.  I find myself in two camps that are definitely not sharing the same fire.  In one camp the reported basis levels for shipments coming out of Brazil tumbled lower in the last 3 weeks for March delivery and beyond seemingly shutting the door on further U.S. sales and leaving the door open for cancellations of U.S. beans purchased earlier by China.  In the other camp the taste of regret that comes from having any old crop soybeans remaining to sell mixed with a 2-year-old narrative of increased U.S. crush demand that is marching forward (supported by this last month’s record crush numbers) leads one to hope the bottom is near.  

Surprise Chinese purchases certainly help the camp of regret’s fire burn a little brighter, but I would prefer to leave both camps and move on to 2024’s crop as soon as possible.

Speaking of China.

China loses the Pop in Population

A popular story making the rounds this week was the population of China decreasing for the 2nd year in a row.  Births fell to a record low in 2023 while deaths reached a record high and the overall population fell by just over 2 million to 1.41 billion.  (The population decrease in 2022 amounted to roughly 300,000 according to Bloomberg.)  

A delayed recording of Covid fatalities could explain the deaths, but the birth rate has been steadily declining since 2016 the same year they ended the one child policy allowing families to have 2 children.  Then in July of 2021 China scrapped all childbearing limitations allowing families to have as many children as they liked.  

China isn’t the only one facing this situation as many developed nations are seeing similar numbers on varying timelines.  But a country with the second largest economy in the world and the largest population grabs the headlines.  It was not a market moving headline as this is a Tortoise story, but on a long enough timeline it will beat the Hare of any other headline that matters as it has everything to do with the cost of tea in China. 

“It’s not so much the heat, it’s the humidity that’ll kill ya.” – Everybody not living in a desert.  

Everyone think warm thoughts but leave the engine running for at least a few more days.

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