A long, drawn-out harvest season slowed the restocking of U.S. soybean supplies, driving October rallies of 14% in soybeans and 38% in soybean meal, according to a recent report from Rabobank.
“We were so tight coming out of the 2013/14 crop that it created a big vacuum, especially with the late harvest,” said Sterling Liddell, a grain and oilseed analyst with Rabobank’s Food and Agribusiness Research and Advisory. “We saw a lot of scouring the countryside looking for beans to crush just to fill backorders on meal.”
Pent-up demand will likely be filled by the end of November, he said, and prices for soybeans should begin to come down as the almost 4-billion-bushel bean harvest settles into silos instead of ships.
DTN Senior Analyst Darin Newsom said the soybean basis is firm without being spectacular, and the futures market spreads are neutral.
“All that means is that right now we are absorbing this massive crop,” he said. He thinks October’s record-setting National Oilseed Processors Association crush, at 158 million bushels, is unlikely to be repeated, although crush should stay strong.
Red-hot export demand also pulled beans away from bins. Last week, USDA reported weekly soybean shipments were 113 million bushels, nearly four times what’s needed to meet USDA’s demand projection. In mid-November, export inspections were running 15% above last year’s record pace, Liddell said.
“It’s all a function of that tight balance sheet that we came out of last year,” he said.
In September, USDA reported soybean stocks at 92 million bushels, a stark reversal from previous estimates of 130 mb. The larger summertime estimates stoked demand for old-crop soybeans and meal, and “everyone was waiting for this huge harvest and living hand to mouth,” Liddell said. “That didn’t take into account the fact that we have had a slow harvest, which has exacerbated the condition and created a real vacuum of availability of physical soybean to crush.”
Soybean processors forked up hefty premiums — in some cases over $4 — to keep plants running.
Newsom said he thinks the vacuum is starting to lose its suction. Prices seem to have cooled and settled into a more seasonal pattern. Over the last five years, cash soybean prices tend to go up from late November into spring. With neutral futures spreads, “it would seem there’s some upside. What’s the fundamental reason for that? Continued strong demand, and it needs to keep going until it’s displaced by South American production.”
USDA anticipates the U.S. will export 1.72 billion bushels in the 2014-15 marketing year.
Liddell and Newsom agree that China’s buying behavior will play the largest role in whether or not the U.S. meets that target. Last year, for instance, China continued to buy U.S. soybeans after the South American crop came online because of Brazilian shipping delays, further tightening U.S. stocks.
“You never really know exactly what China’s going to do except that they’re not going to quit buying beans,” Newsom said.
Now that harvest is about over, Newsom suggested producers watch their local basis and the futures market spreads for opportunities to sell any unpriced grain. Farmers also need to be thinking about pricing some of their new-crop grain, especially since early estimates point to expanded soybean acreage in 2015.
Earlier this month, private analytical firm Informa Economics said it thinks farmers will plant an equal number of corn and soybean acres at 88.3 million apiece.
While Newsom doesn’t expect yields next year to reach this year’s records, the shear amount of U.S. acres and expanded South American plantings could lead to a massive global crop in 2015.
“Watch the new-crop situation carefully because it could ride old-crop’s coattails higher for a while,” he said. “So where I’d like to stay relatively long the new-crop corn market, I’m going to take some opportunities to get some new-crop sales in soybeans, especially if this whole acreage thing pans out.”