Global soybean market remains tight

Focus on Futures: Soybeans

The May 10 USDA crop report, which included the first comprehensive forecasts for the upcoming 2012-13 marketing year, presented a fairly bullish picture for soybeans.

For the US old-crop, estimates for both domestic and foreign demand were raised yet again. This resulted in a significant 40-million-bushel downward revision to the estimate for ending stocks, to 210 million bushels, or 6.8% of usage, down from the previous estimate of 8.2%.

Planted area for the 2012-13 US crop is expected to fall by 1.1 million acres, to 73.9 million acres, or 1.3%. Yields, however, are expected to jump by 2.4 bushels per acre, to 43.9 bushels per acre, or by 5.8%, resulting in a near-record crop of 3.2 billion bushels. Nevertheless, ending stocks are expected at a record low of 145 million bushels, or 4.4% of usage, because demand is forecast to outstrip production, drawing inventories down even further.

The market rallied initially, but the rally lasted for only the day of the report, and then proceeded to drop sharply to multi-month lows (Chart 1). There were no great shocks per-se contained in the report, but the data were definitely more bullish than expected. The average guesstimate for 2012-13 US ending stocks was 164 million bushels, against the actual figure of 145 million bushels.

US exports for the current 2011-12 marketing year are forecast at 1.315 billion bushels, considerably lower than last year’s 1.501 billion bushels. However, exports have been much better than expected, and the USDA is scrambling to keep up. The USDA has revised its estimate for the second consecutive month and is still behind. As of the latest weekly export report, commitments stand at 1.317 billion bushels.

Old-crop sales have been outstanding and much larger than is typical for this time of year, when old-crop sales are winding down. Over the past four weeks, average weekly old-crop commitments were 22.7 million bushels, compared with only 4.3 million bushels during the comparable period last year. Even if the current pace is not sustainable, any degree of continued sales will force the USDA to raise the estimate for annual shipments once again in the June crop report.

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