South American production, US planting progress impact soybean market

25.05.2017

There are several factors influencing the current soybean market, noticeably South American production and also planting progress in the U.S.

It is well known in the market that Brazil has a record crop coming this year which will only add to the amount of soybean supplies available, according to Frayne Olson, crop economist/marketing specialist at North Dakota State University.

“Last year at this time, as we moved into June, we started to get a nice little price rally and the main reason was the Brazilian soybean crop wasn’t as large as they had expected. The last acres harvested in Brazil were actually not as good as everyone thought they were going to be. And at about the same time Argentina also had some very heavy rains that meant a number of their acres couldn’t get harvested and quality was very low. So as of late May, early June we started to get a rally in soybeans that lasted into early July. There were some reasons for that, but this year I don’t see that happening.”

Currently Brazil is at the tail end of harvest and analysts are putting their finishing touches on their final forecasts, but it’s a record by far, and the Argentine crop is still being harvested, but it’s coming off in good shape and the bushels are there, according to Olson.

“There were some concerns of a repeat of last year when the country experienced heavy rains which impacted production and quality, but the rains have shut off and harvest is resuming. This year’s crop is expected to be bigger than last year,” he said.

USDA has estimated the Brazilian crop at 111.6 million metric tons although Olson said he’s seen some private estimates as high as 113 MMT.

“The 111.6 million metric tons estimate represents an increase of 15.5 percent from Brazil’s 2016 production of 966.5 million metric tons. That’s a big jump,” he said. “In total, there are just a lot of beans around.”

Soybean acreage in the U.S. is up. Exactly what the numbers are won’t be known until the final planted acreage report comes out the end of June. Planting progress thus far is behind last year’s rapid pace but is relatively normal compared to the five-year average, according to Olson.

“We’re only part way through the planting process so we have a lot of growing season left,” he said. “There is a possibility for some price rallies, but it’s kind of quiet right now. I don’t expect that to last much longer.”

Despite the large supplies available, prices have remained stable.

“I’ll be very blunt, I’m actually surprised prices have held up so well given the supply side of the situation, and that’s due to a strong demand base, especially from the international markets both for soybeans and soybean meal,” he said. “As prices have come down our traditional buyers like China, Mexico and Japan have increased their buying, we’ve also seen new countries stepping in and buying more beans from the U.S. In the Southeast Asian pocket, including Thailand, Indonesia, Malaysia and the Philippines, they’re buying more from the U.S.”

As their economies grow, so does their demand base and there’s an increasing shift in demand for feed and there’s more interest in moving to animal protein from a vegetable protein. Animal protein is an important feedstock and soybean meal and corn are two important feedstuffs.

Soybean exports from the U.S. are very seasonal, according to Olson. Just before harvest, exports out of the U.S. are very low, but then as new crop soybeans start hitting the market, export sales jump very dramatically and peak out during harvest and then drop off a bit over the winter months and stabilize.

“About the time the South American crops start harvest and South America begins selling aggressively off the combine our export sales start to drop off and get much lower,” he said. “When you compensate for that, our export sales for this time of year, even though they’re very low, are better than they’ve been. So we’re still seeing a pretty good export pace for this time as you adjust seasonally for the patterns.

If you look back – our export sales are still better over the past two years and that’s a very good signal that there is still a good demand base there.

“If there wasn’t this continued growth for soybean meal we’d see lower prices.”

On the crush side, the U.S. has seen a very good crushing pace. The last several months the crushing demand has been there, according to Olson, adding there has been a little bit of a drop off the last month or so but he’s not terribly concerned about that short term.

“I do think that we’re still ahead of where we were this time last year,” he said.

The National Oilseed Processors Association (NOPA) comes out with a monthly update on the amount of soybeans crushed which indicated a slight drop off, though Olson said he doesn’t think it’s a major concern at this time. USDA recently added back its survey of the crushing sector which includes more than just NOPA members.

“I do think that as we move into the summer months we’ll see a rebound so I’m not terribly concerned about that,” he said.

Looking ahead, Olson encourages producers to look for opportunities to make some sales for old crop soybeans.

“I know there’s a lot of old crop soybeans left, so if we do get these price rallies I really want to encourage farmers to take advantage of these and try and get some sales,” he said. “There are some people I’ve talked to that hope we could get the kind of rally we saw in 2012. It is possible, but it’s very unlikely. The market conditions we’re in today are very different than what we saw in 2011 and 2012. If we were to have some kind of major weather scare, yes, prices would rebound, but they wouldn’t be to the levels we saw in 2012.

“The conditions are different today. We do have much larger domestic and international stocks to draw off of and so, yes we could get price improvement, but we’re not going to see those kinds of price rallies,” he continued. “So again, take advantage of price improvements because there is a lot of grain to move through the system. Don’t be messing around.”

Old and new crop soybean prices were $8.70 per bushel as of May 17.

Looking at the oilseed market in general, Olson said he is watching canola, which is a competing oilseed. The planting progress in Canada, which is a major producer and exporter of canola, is behind normal. There are some concerns, particularly in Saskatchewan, and parts of Alberta, but there are very, very wet conditions and Canadians are worried about getting all of their canola planted.

“As a competing oilseed, that is something that I am watching because, at least in northern Minnesota and parts of northern North Dakota, we have a lot of canola growers, so I’m trying to pay attention to that as well,” he said. “It probably won’t have a huge impact on soybeans or soybean prices, but it is a competing oilseed so in the world of vegetable oils it does have an impact.”


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