Even though the domestic balance sheet on U.S. soybeans is tight, it has not greatly impacted the soy complex. This is mainly from the global market, and how that supply of soybeans is much greater.
There are some thought that next year’s global soybean production will be record-sized, as much as 20 million tons more than this year. If this is correct, it will greatly alter the demand forecast for U.S. soybeans, along with futures values.
There are also some thoughts that old-crop soybean demand is being overestimated at present. While the United States has seen large soybean sales in recent weeks, these have been mostly on new-crop, not old.
Old-crop soybean loadings are also trailing sales, indicating some old-crop sales may be rolled over. While these sales will still be on the books, they will be filled with new-crop supply, not old.
Data from the firm F.C. Stone backs up these thoughts on soybeans. Historically, the United States rolls from 40 million-75 million bushels of old-crop soybean sales to new-crop delivery. Even the low end of this average range will have a significant impact on old-crop carryout.
For corn, the United States usually rolls an average of 35 million bushels of old-crop sales into new-crop delivery.
The real issue in the current supply and demand debate is how much soybean yield the United States can afford to lose. If the national soybean yield would drop as little as 3 bushels per acre, it would practically eliminate our new-crop ending stocks.
Even a reduction to yield as little as 2 bushels would prompt price rationing in the new-crop soybean contracts. This concern is keeping a floor under the deferred soybean futures for the time being.
Trade is questioning when new-crop soybeans will be available, regardless of yield. At the present time it appears these are at least 60 days from being harvested and into the supply line. This is roughly one week behind normal in many regions.
The question now is if this adds premium to the old-crop contracts, or causes crush facilities to suspend operations for an extended period of time.
Debate continues over how many acres the United States may have left unplanted this year, particularly on corn. Several field tours have been done in recent weeks, and claim unplanted acres may be larger than what the USDA is reporting. This is especially true in states such as Iowa and Minnesota.
The USDA appears to be using an unplanted number of 1 million corn acres in its data, which may be more accurate than trade wants to believe.
Trade is starting to reevaluate its future corn demand estimates. For the past several years we have seen corn demand climb, mainly from increased ethanol production. This source of demand is now leveling out, meaning more corn for other uses.
At the same time global corn production is increasing to a near-record volume, which could soon mean an overabundance of corn in the United States.
We could also start to see demand for U.S. soybeans in the global market decline. Brazil is forecast to produce a soybean crop this year close to 89 million metric tons (mmts). This compares to 82 mmts last year, and just 66 mmts the year before.
If the United States would just produce a normal crop and add it to the South American production, that would push global soybean inventory up 20 mmts from a year ago, and close to a record amount.
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.