Neither farmers nor commercials are showing any interest in marketing soybeans at this time. The next flush of soybeans will likely come near the end of this calendar year.
Any significant corn or soybean movement, for that fact, will most likely be in early 2013. Basis values indicate most buyers do not have enough coverage to make it that far, especially soybean processors.
Soybean buyers continue to push for deliveries in an effort to capture elevated crush margins. Even with today’s higher-than-normal soybean futures, the values of meal and oil are a great benefit to the industry.
The average return on crushing soybeans right now is between $1.05-$1.10 per bushel. With this return, crushers will push bids as hard as they need to secure soybean inventory.
Chinese officials believe that country’s soybean imports will continue to grow. These individuals believe China’s soy imports will expand at a rate of 5-6 percent per year over the next five years.
This is actually slower than in recent years, though, as Chinese bookings this year are already 18 percent greater than last year. Many of these imports are needed to fill government storage facilities that were emptied to cover domestic needs.
Trade continues to debate South American crop production estimates. More interest in grain production is focusing on corn, though, not soybeans as it has in the past. Brazilian officials claim their corn crop will be roughly 2 million metric tons greater than what the USDA is forecasting at the present time.
Argentine officials are not as positive, though, and believe their corn crop could be up to 7 million tons fewer than initial estimates because of stressful weather conditions.
As it always is, the condition of Brazil’s infrastructure is being questioned. This is becoming more of a factor as South America becomes more of a corn and soybean supplier to the global market.
It is interesting to note that the current usable portion of rail lines in Brazil is less than it was 90 years ago. This means much of South America’s grain production must move by truck, sometimes as far as 1,300 miles in one direction.
While most talk of potential crop sizes has focused on the United States and South America, there are also projections being made for China. The U.S. attaché in China is predicting a soybean crop between 10 million-12.5 million metric tons (mmt) this year.
This estimate range compares to the latest USDA estimate for 12.6 mmt. Even with a slightly larger than expected Chinese soybean crop, the country will still need large imports – as much as a 33 percent increase in the next three years.
There are also estimates being released on China’s corn production. The country’s corn crop this year is expected to be 3 percent larger than last year, at 198 mmt. This is also below recent projections for the crop to fall between 200-205 mmt. As with soybeans, corn imports will still be needed to cover an ever-growing demand.
Private analysts expect next year’s global corn output to spike from that of this year. World corn production is forecast to rise 111 mmt this coming year. The majority of this increased corn production is forecast to come from the United States, where a 3.9 billion-bushel rebound in crop size is expected.
This increase in the U.S. corn crop is being based on normal growing conditions, though, which the United States has not experienced for the past three years.
Karl Setzer is a commodity trading advisor/market analyst at Maxyield Cooperative. His commentary and market analysis is available daily on radio, in newsprint and on the Internet at www.maxyieldcooperative.com
The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources are believed to be accurate.
This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.