06/02/2015: Commodities: US soybeans

by Matthew Wilde, ISA senior writer

First published in Milling and Grain, January 2015

Soybean buyers worldwide are on a spending spree, restocking supplies and propping up prices. But that soon could come to an end. A Des Moines risk management consultant advises farmers to sell now because US$10-plus soybeans, while nothing to write home about, may look good in months to come.

“The market is short-term friendly and long-term bearish,” said Matt Campbell of INTL FC Stone.

“I’m very much a believer in marketing old and new crop beans. They are overpriced.”

Cash soybeans are more than US$9.80 per bushel throughout much of the state. January beans on the Chicago Board of Trade closed at US$10.33 per bushel on Monday.

In anticipation of a record soybean crop and the highest carryout figure in years, many commodity analysts predicted prices would plummet to US$8.50 per bushel or less during harvest. Record domestic and export demand prevented a free-fall.
Eventually, Campbell said the buying frenzy will slow and large supplies will remain. He expects a price drop to occur, albeit later than original projections.

“The bean market will start to fail in the next few months,” he said. The US soybean harvest is nearly complete, according to Monday’s weekly US Department of Agriculture (USDA) Crops and Weather Report. Only three percent and one percent of the crop, respectively, still remains in fields nationwide and in Iowa.

Typically, all soybeans are in the bin or off to market by now in Iowa and the other leading soybean producing states.

“The cold weather and snowfall continue to create challenges for farmers,” said Bill Northey, Iowa Secretary of Agriculture, but not to the point supply is an issue.
 

The November USDA World Agricultural Supply and Demand Estimates (WASDE) Report pegged the nation’s soybean crop at nearly 3.96 billion bushels, 31 million higher than the October forecast. The increase, though, was almost entirely offset by higher soybean export and crush projections.

US soybean exports for the 2014/15 marketing year are estimated at 1.72 billion bushels, up 20 million bushels from October estimates, according to the WASDE report. The soybean crush is forecast at 1.78 billion bushels, up 10 million due to increased exports.

Grant Kimberley, Iowa Soybean Association market development director, said robust demand is keeping prices from bottoming out. Crush margins are strong, livestock prices are profitable prompting expansion and soybean prices are several dollars lower than previous years.

“If I’m a buyer, I’m pretty happy,” Kimberley said. “Ultimately, it will come down to what kind of crop Brazil and Argentina have. If it’s good, prices will come down. If it’s a little lower than expected or there’s shipping disruptions, then that will help hold the line on prices and maintain the current floor,” he continued. “There’s always ‘what ifs’ in farming.”
Right now, though, there are plenty of ships full of soybeans and soybean meal heading overseas. China is and continues to be the big buyer of whole soybeans while the Philippines and other Pacific Rim nations are purchasing boatloads of meal.

For the first time in US history, soybean exports exceeded two million metric tons, or nearly 73.5 million bushels, for three consecutive weeks. According to the USDA, the record-setting streak ended on November 7-13 when exports exceeded 113 million bushels — a marketing-year high.

“The trade has continuously underestimated China the last five years. It’s always speculated they will cancel a lot of contracts or cut back, but that doesn’t happen as much as analysts think,” Kimberley said.

“I’ve been there 10 times and that train isn’t stopping. It’s a big train.”

This month the USDA projected soybean ending stocks for the 2014/15 marketing year at 450 million bushels, unchanged from October. That’s compared an estimated 92 million bushels the previous marketing year and 141 million in 2012/13.
 

The USDA estimates the US season-average soybean price at US$9 to US$11 per bushel. It was US$14.40 during the 2012/13 marketing year and US$13 the previous year when supplies were tight.

Despite a drop in soybean prices, Campbell believes farmers nationwide will plant even more acres next year. Another three million from this year’s record harvest area of 83.4 million acres nationwide is likely, he contends.

Record soybean demand and current corn prices  - about US$3.50 per bushel cash and about 40 cents more for May delivery on the Chicago Board of Trade - are working in soy’s favor, Campbell said.

“Producers are better off at today’s prices planting beans,” he continued. If farmers do increase soybean acres next year, Campbell said prices won’t improve much, if any, even if yields are subpar.

“If you’re making input decisions today, you have to be making sales today,” he said.


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