Market will watch for indications of larger soybean exports

12.10.2016

Soybeans are made in August, and much of the Soybean Belt experienced temperate growing conditions in August and large soybean production.

Now in October, farmers and the media are reporting excellent – likely record high – soybean yields.

The Oct. 12 Crop Production report will tell if the crop is even larger than anticipated.

In the September Crop Production report, the yields were expected to average a record 50.6 bushels per acre. At that time, the area for harvest was forecasted at a record 83 million acres. Production was forecasted at a record 4.2 billion bushels.

As of Oct. 9, farmers had 44 percent of the 2016 U.S. soybean crop harvested compared with 47 percent on average. Farmers had 56 percent of the soybeans harvested by the same timeframe in 2015.

Soybean futures traded on Oct. 11 with November at $9.52, January at $9.59, March at $9.66, May at $9.73 and July 2017 at $9.78 per bushel.

A carry continued to develop in the soybean market.

With the November 2017 soybean futures bid at $9.615 per bushel (on Oct. 6) and the December 2017 corn future at $3.81, the soybean-to-corn-ratio was 2.52. That number is not likely to favor U.S. production of one crop over the other. Farmers are more likely to select crops that offer some level of profitability based on yield potential.

At one elevator in western Minnesota followed in this column, cash soybeans on Oct. 11 were $8.55 per bushel with a basis of 97 cents under. Compared to the bid on Sept. 22, the price was 49 cents lower, and the basis had widened by 25 cents.

At this local level, the October 2016 bids offered a soybean-to-corn-ratio of 3.075 – suggesting greater value to soybeans than corn. For October 2017, the soybean-to-corn-ratio was 2.74 on Oct. 11, 2016.

Looking at the demand side of the picture, weekly net export sales of soybeans were 2.18 million metric tons (80 million bushels) for 2016/17 reported for the week ending Sept. 29. Export weekly shipments were 1.027 million metric tons (37.7 million bushels).

“The buying is not a surprise, but the amount that is being purchased is very positive long term and could indicate that USDA is going to have to ramp up export projections at some later point in time,” said Al Kluis, commodity advisor and broker. Kluis is also president and managing partner of Kluis Commodities in Wayzata, Minn.

He added that South American plantings were off to a good start in October.

“It looks like they’re going to have a slight increase in potential production out of Brazil this year, with normal weather, and a possible cutback in planted acreage of soybeans in Argentina because of the tax policies – but it’s too early to put any definitive estimates on production,” he said.


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