The U.S. Department of Agriculture issued its report on annual U.S. crop production on May 10, resulting in what appears to be a bullish outlook for the soybean market ahead.
Ending stocks for old crop soybeans came in at a decreased 210 million bushels, and on the new crop side, the 2012 national soybean yields is estimated at 44 bushels per acre, while increased exports are slated to bring ending stocks down for next year to145 million bushels, a mere 4.4 percent.
Darin Newsom, senior analyst for DTN, said on May 10, the decrease in old crop soybean stocks was "curious," adding that there has been good demand for soybeans, but not extraordinary demand. He said many of the daily sales are through 2012-2013, and that exports have been average at best.
Soybean supply, demand
Ending stocks decreased by 40 million bushels according to the USDA's May 10 report. Figures showed an increase in soybean demand, with supplies left unchanged and reflecting a strong export demand.
"Export demand was strong, but only strong enough to just meet this 1.2 million bushel figure," Newsom said. "We were slightly behind pace to meet the 1.29 million bushel (projection), so to put another 25 million bushels on there, we're going to have to see a pretty good pace increase for shipments.
"We need to keep an eye on those to see if the pace begins to increase, if demand for U.S. soybeans gets as strong as what the USDA is looking for right now."
Sorting it out
Newsom said the soybean outlook summary shows that crush demand is up by 15 million bushels; export demand is up 25 million bushels for a total of 40 million bushels despite the pace that has been running behind, and ending stocks to use decreased to 6.8 percent.
"If we look at the July, August and September contracts, we do see that same inverted forward curve. It would seem to suggest that we have seen a tightening of old crop ending stocks. Maybe that 210 million bushels of ending stocks for 2011-2012 could be realistic, it just seemed surprising, seeing the bulk of the increase in demand coming from export shipments," Newsom said.
He said another surprise was the November-through-next-September's future spreads for new crop bushels.
"Coming in at 145 million bushels for new crop ending stocks seems to be a bit more severe than what the market is telling us right now," he said. "(There) could be so much focus has been on the old crop for both corn and soybeans, that new crop has kind of fallen by the wayside. But if we are down to 145 million bushels, look for the forward curve to get a bit more severe."
As far as the old crop soybean basis, he said the market is flattening out, finding a comfort zone between the high and the average of the last five years, resulting in no extraordinary basis or demand for merchandisers right now.
He said it would suggest merchandisers have been able to obtain soybean supplies to meet demand, and that demand hasn't picked up so much that they're having to push the cash market.