US Soybean Weather/Crop Progress Latest
As I've just done with corn, now let's have a look at the top five US soybean producing states.
The same top five corn producers are also the top five soybean growers too.
Iowa is also the biggest bean state with an anticipated 15.2% of the national crop this year. After that comes Illinois with 12.6%, then Minnesota with 8.7%, Nebraska at 7.6% and finally Indiana with 7.1%. These states combined therefore account for just over half (51.2%) of national output.
Harvesting was just 37% done in Iowa, against 85% normally, as at Sunday 18th. Things were even worse in Illinois at 13% complete compared to 79% on average. Elsewhere we had Minnesota at 34% (83%), Nebraska at 55% (75%) and Indiana at 27% (72%).
As with corn, we can pick out Illinois and Indiana as being the two states with the biggest problems. They've had plenty of rain in the past week, and there's another good dose in the forecast through to Thursday this week.
These two states are also the furthest behind with winter wheat plantings: Illinois 13% complete compared with 67% normally and Indiana 22% done (69% on average).
Trade talk for tonight's USDA crop progress report is that nationally the soybean crop will be 40-50% harvested, from 30% done last Sunday.
Soybeans: Are The US The Only Shop In Town?
Now here's an interesting thought, reports are reaching Nogger Towers than Brazilian soybean supplies on the open market have all but ran out.
Certainly export pace out of Brazil has been phenomenal with exporters keen to cash in on a combination of high Chicago prices, strong Chinese demand, the large-scale crop failure in Argentina and the big inverses that we've been seeing between front-end and deferred month contracts.
The rate of exports has been pushing up domestic premiums to such an extent that Brazilian crushers may soon be looking to import US beans themselves, according to some reports I am hearing.
It's happened before, and would explain why China (who reportedly bought 896,000 MT of US beans last week) keep coming back for more, all the other shops are shut!
Have Soybeans Peaked #2
Following on with the theme of have we now seen a top in the soybean market, I thought I'd check out some seasonal trends to see how things have panned out in previous years.
The research has thrown up some interesting information.
Since 1970, either May, June, July or August prices made the yearly high in 22 of the 38 years. The worst months to sell beans were February and March — not once in the last 38 years did either month’s price make the yearly high — closely followed by the harvest months of September, October and November whose monthly prices each led just once since 1970.
If you look at the seasonal trend, there is a tendency for the market to dip in February, commonly referred to as the John Deere low, followed by a rally to the spring high, frequently set around May. We then have an early summer low as planting gets underway and before any weather scares emerge, frequently followed by a weather-related rally to post a yearly high in June.
After that the market often dips quite sharply setting an August low, before staging a mini rally, before finally slumping to a yearly low at harvest-time in October.
Once harvest pressure has subsided, the market often recovers quite sharply during November/December and through into January, before the whole cycle starts over again.
The chart below shows the 40 year seasonal average (blue line) for front month beans, and the 15 year average (brown line), with the current spot month to date overlaid in purple. (The months highlighted in yellow across the top are the contract month being plotted):
And here is a similar chart plotting the May soybean future from 1980-2008, with the usual highs and lows indicated:
Spookily similar n'est pas?
It is interesting to note the strong seasonal tendency for the market to fall out of bed mid-June, stage a half-hearted weather-related scare mid-July, before completely capitulating into an August, then October harvest low.
It is also worth noting that these two lows are usually well below the February John Deere low, which was around $8.50 this year, suggesting that a move to $8/bushel might be on the cards by October for the November future. That's $1.80, or around 18%, below last night's close.
You can all buy me a beer on the strength of that lot if it comes to pass. Right, who wants to buy any forward soya or rapemeal?
Have Soybeans Peaked?
A strong case can easily be made that soybean prices have peaked, certainly for new-crop months, for the time being.
Informa Economics and Allendale both issued sharply higher planting estimates for the US 2009/10 crop on Friday, the forma (ha ha!) coming out with 78.9 million acres and the latter with 78.484 million.
That puts plantings some 2.5-2.9 million acres higher than the USDA's March estimate of 76.024 million acres, and even that estimate was an all-time record for soybeans.
The current highest area ever planted was last season's 75.718 million.
Very early indications from Argentina are that they will plant a substantially increased acreage for their 2009/10 crop. With plenty of land not going into wheat this year, Argy farmers are expected to plant 19-20 million hectares of beans for next season, up 15-20% from the record 16.6 million planted last season.
Despite the controversial export tax, the soy market is not vulnerable to the political tinkerings with export permits that have until recently brought the trade in Argentine wheat and corn to a standstill.
All this rather makes $10/bushel beans look like one hell of a sale for new-crop positions, and has a strangely reminiscent feel to that of the wheat market twelve months or so ago.
Back then, the world & his wife planted wheat everywhere 'including their own backyard' leading to the bumper 2008/09 production that is still depressing the market even now.
It should come as no great surprise therefore that with spot beans over $12 and new crop over $10, US farmers decided to start readying their own back yards once again, this time for beans.
With spring wheat and corn plantings delayed in some areas, the carrot going for beans at $10+ instead seems to have proven to be a no-brainer.
Interestingly, despite broadly concurring on soybeans, Informa and Allendale are miles apart on corn acreage. Informa say 83.111 million and Allendale 84.775 million. in March the USDA came out with a surprisingly optimistic (even then, before the rain) 84.986 million.
Informa clearly see plenty of corn acres being switched into beans, either by virtue of some US farmers being unable to get their corn in on time, or the relatively high price of beans proving simply too tempting for others.
Allendale see it quite differently, with only a slight reduction in corn acres. Reduced plantings in Missouri, Illinois, Indiana, and North Dakota will mostly be made up by increases in Nebraska and Iowa, they say.
So where does their big soybean increase come from? Principally double cropping with winter wheat, although some spring wheat area (331,000 acres) will be switched into beans, the vast majority of these extra acres will come from newly harvested winter wheat, according to Allendale.
The USDA will be out on June 30th with their revised estimates, but before that we have planting progress and crop condition reports to look forward to tonight.
Last week the key soybean states of Illinois and Indiana, which together grow a quarter of the US soy crop, still had some 3.3 million acres (1.3 million hectares) of soybeans yet to seed.
The Pace Of US Soybean Exports
After weeks of large old crop export sales, things finally returned to more like normal for this time of year this week with the USDA announcing sales of "just" 237,400 MT. That's the equivalent of just under 9 million bushels.
For the entire marketing year the USDA have an export sales target of 1.240 billion bushels. IF sales from here on in only continue to run at 9 million bushels a week we would finish up with final ending stocks of just 65 million bushels by my calculations. That's half of what the USDA is currently projecting.
And that is based on weekly export sales of around 240,000 MT, over the last ten weeks old crop sales have averaged more than double that at 569,000 MT!
Weekly sales need to fall very sharply away over the remainder of the season to avoid ending stocks becoming perilously tight, especially in view of a potentially late harvest.
Has Anyone Seen My Panic Button?
The lowest estimate yet for this season's Argentine soybean crop comes from the Argentine Rural Confederation, or CRA, who now peg the 2009 soybean crop at just 30.5 MMT. That's a far cry from early season expectations of a record 50 MMT harvest, and highlights why China just keep coming back for more US soybeans. As well as quantity, quality seems also set to be an issue with Argentine beans this year, reducing US stocks to precariously low levels. Earlier this week Informa pegged August 31st US ending stocks at just 77 million bushels, significantly lower than the USDA's figure of 130 million released last week, and the smallest stocks since 1972. Stocks to usage meanwhile is the tightest on record at 4.3%. To put this into perspective, the Informa figure equates to just one week's supply, which is incredibly tight considering the late start to planting in the US.
Could China Really Save The World?
Could This Be The Start Of Something Big? Or just another false dawn? It's an interesting one to call, but could China really save the world? They certainly appear to be giving it their best shot.
Their government's 4 trillion yuan ($586 billion) stimulus package is sparking signs of the green (bamboo) shoots of recovery in the world's third largest economy. China’s retail sales rose a surprise 14.8 percent in April from a year earlier, data out today reveals.
As well as re-building the country's entire infrastructure including bridges, roads, railways, oil pipelines, irrigation networks etc, they also plan to build up domestic soybean and corn reserves reserves.
By buying 7.5 MMT of soybeans (which incidentally is almost half of their entire national production) off local farmers, they are pumping cash into the rural economy. That leaves a lot less soybeans to go round for the domestic crushers who are busy importing beans like there is no tomorrow.
China will import 37.5 MMT of soybeans in 2008/09 (up from the 36 MMT estimated in April), rising to 38.1 MMT in 2009/10 the USDA said yesterday. In April alone they imported 3.71 MMT, and May in imports could reach an all-time record 4.2-4.6 MMT according to one local analyst.
And much of that volume is coming from the US, sales since Sept 1st to China are up 41% the USDA said yesterday.
Meanwhile global production is falling, down to 212.8 MMT say the USDA, from the 218.8 MMT forecast a month ago and the 221.1 MMT harvested last year, largely due to reduced output from Brazil and Argentina.
Argentine will produce just 34 MMT this year according to the USDA, and even that estimate may prove optimistic when all of the crop is finally harvested with some private estimates in the region of 31-33 MMT. A far cry from early season hopes of a 50 MMT record crop.
And in addition of course there are political problems aplenty in Argentina, with farmer strikes and blockades an ever present threat. That leaves Brazil and the US as very much preferred suppliers.
Consequently the USDA yesterday dropped their US old crop ending stocks estimate to 130m bushels from 165m last month, the tightest ending stocks since 2003. More importantly than that stocks to usage is 4.3%, that is the tightest since 1968.
I'd like to buy some soybeans please Mr US Shopkeeper. Certainly Sir....
USDA: US Soybean Production
Here's a quick resume of the salient points with regards to US soybean production and demand for the coming season:
Soybean production is projected at 3.2 billion bushels, up 236 million from 2008/09 reflecting a small increase in harvested area and a trend yield of 42.6 bushels per acre. Soybean supplies are projected at 3.3 billion bushels, up 5 percent from 2008/09 as smaller beginning stocks partly offset increased production.
Soybean crush for 2009/10 is projected to increase 2 percent to 1.675 billion bushels reflecting a small increase in domestic meal use and higher exports. Domestic soybean oil consumption is projected to increase 1 percent as biodiesel expansion is partly offset by a small decline in food use. Soybean oil used for biodiesel production is projected at 2.2 billion pounds, up 300 million from the revised 2008/09 estimate of 1.9 billion.
Reduced South American supplies, due to drought in Argentina, Paraguay, and southern Brazil, are projected to push U.S. soybean exports to a record 1.26 billion bushels. Ending stocks are projected at 230 million bushels, resulting in a relatively low stocks-to-use ratio at 7 percent.
