While USDA’s old-crop corn carryover estimate held at 801 million bu., soybean carryover drifted lower and was likely to slide even more into the end of the marketing year. So while corn is fearing a Sept. 1 surprise, soybean futures are trying to slow use to hold carryover around 240 million bushels. The further old-crop carryover slides this year, the smaller the supply-side cushion for the 2012-13 marketing year.
Until early May, it appeared the bean market finally had found the price that would slow the price advance. May soybean futures posted a downside key reversal the day they posted a contract high above $15, triggering a round of long liquidation. But South America’s drought tightened exportable supplies in Argentina and Brazil. And with the pace China was buying old- and new-crop beans in early May, exportable supplies from both South American countries were evaporating quickly.
In early May, it was estimated that 80% of the 2011-12 Brazilian soybean crop already had been sold to domestic crushers or committed to exports. That left only about 475 million bu. (13 million metric tons) of soybeans to meet export commitments and to supply domestic users until the 2013 harvest.
And, once again, because South American stocks normally “fill the gaps” in U.S. supplies for the globe’s importers, a short crop in South America increases the U.S. new-crop soybean export forecast.
It’s that expected big increase in U.S. exports in 2012-13 that has many market-watchers anticipating higher bean prices in the months ahead. Even under the excellent crop scenario, 2012-13 soybean carryover is expected to be steady this year. That, however, does not mean a steady national average cash soybean price. It will take a lower-than-this-year average price to encourage nearly 250 million more bushels of use than year-ago (“Beans on the run,” below).
But even an average growing season points to a sharp drop in carryover and an increase in prices. A poor growing season would force prices sharply higher just to keep total use about equal with the current marketing year.