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NAPERVILLE — U.S. soybean exports have been unusually strong so far this month and sales activity has ticked up in recent weeks despite a weaker outlook from the government.

In line with most analyst ideas, the U.S. Department of Agriculture earlier this month reduced domestic 2022-23 export estimates for both soybeans and corn, the latter of which still may disappoint versus expectations.

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But soybeans are on a more positive track for now.

As of Jan. 19, U.S. soybean sales for 2022-23 totaled 46.5 million tonnes, up 5% from a year earlier. USDA has soy exports down nearly 8% on the year, meaning sales have some wiggle room.

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Cumulative Jan. 19 soybean commitments covered 86% of USDA’s 2022-23 target of 54.2 million tonnes compared with 79% coverage a year earlier, and average is somewhere between the two. But things drastically changed at this time last year when the market realized top exporter Brazil’s crop had run into serious trouble with the drought.

Last year, large daily sales of old-crop soybeans started rolling in at the very end of January. But in the weeks and months before that, many market participants believed the government’s 2021-22 export outlook was a bit aggressive.

Robust sales are not necessarily needed from here as only 7.6 million tonnes stand between Jan. 19 sales and USDA’s full-year forecast. That is well below average and roughly half of what was sold between now and Aug. 31 last year.

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Two old-crop soybean sales have flashed so far this week totaling 322,000 tonnes.

CHINA AND ARGENTINA?

Sales to China plus unknown destinations are the third- highest for the date behind 2021 and 2017 and up 20% on the year. This means if many of the unknown sales are to China as is often assumed, Chinese appetite for U.S. soybeans may be better than it has appeared.

Net U.S. soybean sales to unknown destinations in 2022-23 are record-large for the date at 4.6 million tonnes. Sales to China of 28.2 million tonnes as of Jan. 19 are up 11% from last year.

The crop of Argentina, the No. 3 soybean and top soy product exporter, has been battling drought. The beans remain in tough shape despite recent rains, so if forward weather is disappointing, Argentina could show up in the U.S. market as it did in 2018, also following severe drought.

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That would primarily impact 2023-24 sales, as Argentina first started buying new-crop U.S. soybeans in April 2018, then activity dried up by early 2019. The United States shipped a record 2 million tonnes of soybeans to Argentina in 2018-19, following an also-rare 200,000 tonnes in 2017-18.

However, Brazil earlier this month reported “atypical” sales of soybeans to Argentina for shipment early this year, potentially lowering U.S. hopes. Brazil had a strong, record bean crop in early 2018 and shipped a record 657,000 tonnes to Argentina that calendar year.

NEW CROP

USDA on Thursday flashed an export sale of 106,000 tonnes of new-crop U.S. soybeans to China, the first for 2023-24 explicitly to China. Some 129,000 tonnes had been sold to China in the week ended Jan. 19, revealed in Thursday’s weekly export sales. January is a normal time for new-crop bean sales to start up, though the pace is well below average.

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Only 431,000 tonnes of 2023-24 U.S. beans were on the books as of Jan. 19 to China and unknown destinations combined, the lowest for the date since 2020. China was notoriously quiet three years ago until bookings exploded in June and July, helping the CBOT futures rally kick off shortly afterward.

CORN

As of Jan. 19, U.S. corn sales for export in 2022-23 covered only 49% of USDA’s recently lowered outlook of 48.9 million tonnes. Average is closer to 60%.

Typically between 35-40% of the year’s corn sales occur between Jan. 19 and the end of the marketing year on Aug. 31, implying that above-average volumes are needed from here to satisfy export targets.

Heavier Chinese purchases as were observed in the last two years have been elusive, and current export ideas are likely still too optimistic without them. But some market-watchers remain hopeful that China is not yet done in the U.S. market.

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I asked my Twitter followers on Thursday if they thought China has yet to make significant purchases of U.S. corn for 2022-23. Early in voting, two-thirds of more than 300 participants said Chinese buying is still on the table.

China’s newly established interest in Brazil’s corn market is well known now, but the impact on U.S. imports is not. Brazil’s expected January corn exports are nearly double the month’s three-year average, and China is seen turning to Brazil for a substantial amount of its corn needs going forward.

Chinese corn futures are currently higher than a year ago but even with the January 2021 levels. Karen Braun is a market analyst for Reuters. Views expressed above are her own.

(Reporting by Karen Braun Editing by Matthew Lewis)