PFA Pioneer Blog
What it takes to get down to USDA's bean export estimate.
Feb 14, 2014
Pro Farmer Extra
- From the Editors of Pro Farmer newsletter -
February 14, 2014
Today's perspective is provided by Pro Farmer Editorial Director Chip Flory
Bean market needs export cancellations to get down to USDA export estimate
Yes, you read that headline right. There are still 5 1/2 months left in the 2013-14 marketing year and total soybean export bookings are above USDA's current export estimate. That's still the case, even after USDA added 15 million bu. to its export expectations in the February Supply & Demand Report released earlier this week.
USDA sees soybean exports of 1.510 billion bu. in the 2013-14 marketing year and total export bookings are already up to 1.587 billion bushels. Actual bookings are 77 million bu. (nearly 2.1 million metric tons) above USDA's export peg. Simply put... even USDA sees China canceling some bean buys as the Brazilian bean crop makes its way to the market.
In this week's S&D Report, USDA increased estimated bean exports by 15 million bu., but increased estimated imports by 5 million bu. and cut estimated residual "use" by 10 million bu. to hold carryover at 150 million bushels. Most likely, the balance sheet for soybeans could absorb another 10-million-bu. hike in the export estimate and carryover would still be held at 150 million bushels. USDA's residual use estimate is 12 million bu. and the comments in the S&D Report certainly suggest residual use could be cut to 1 or 2 million bu. in future updates.
That's strong evidence USDA doesn't "want" to drop bean carryover below 150 million bushels. Another way of looking at it is USDA probably doesn't want to drop the stocks-to-use ratio for soybeans much below 4.5%.
As Brazilian beans move into position for export, China will cancel some bean buys. It started this week with the purchase cancellation of 272,000 MT of U.S. beans. The market's immediate reaction was negative - even though there is a long ways to go to get down to USDA's export estimate. Old-crop bean futures are working on a breakout to the upside, but a string of export cancellations by China could make it difficult to build enough upside momentum to get March futures up to the 2013 highs just over $13.75.
Follow Pro Farmer Editorial Director Chip Flory on Twitter: @ChipFlory
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