It was definitely a bearish development. To put things in perspective, however, at 4% of consumption, it will still be the lowest U.S. ending-stock figure in history. So it is imperative that the improved weather in mid-September be effective in raising yields substantially. Moreover, a successful harvest is also crucial. Because of the very late planting season this past spring, the crop will be in the fields longer than in other years, exposing the plants to a greater risk of frost. Only 11% of the crop has been harvested so far. That compares 39% last year at this time and the five-year average of 19%.
Even with the U.S. crop smaller than early season expectations, global ending stocks should remain stubbornly high. While the September crop report slashed U.S. output by 3 million tonnes, the estimate for Brazilian production was increased by the same amount, to a record-by-far 88 million tonnes. Planting is just underway in Brazil, so we’re a long way off. With anything even close to normal weather conditions, however, the impact of the somewhat disappointing U.S. crop is dwarfed.
At 53.5 million tonnes, the Argentinean crop will not be a record – 2010-11 output reached 54.50 million tonnes – but will be significantly higher the last year’s output of 49.40 million tonnes.
The demand side is bullish. The USDA is forecasting a 4% increase in U.S. exports, but export commitments to date show that sales are ahead by 15.8%. The entire anticipated increase comes from China. The estimate for Chinese imports is 69 million tonnes, up 9.5 million tonnes, or 16% from last year.
Even if it all gets shipped, supplies will be ample to meet known demand and beyond. Global ending stocks for 2013-14 are estimated at 71.54 million tonnes, or 26.6% of consumption. That’s the second-highest inventory level in history.
Sell short January soybeans. Place initial stops at $1,350 per bushel, close only.