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Brian Grete: Tight Soybean Supply, Strong Demand Supports Prices

July 24, 2013
By: Sara Schafer, Farm Journal Media Business and Crops Editor
 
 

Adviser Q&A: Brian Grete, Pro Farmer

brian grete

Q: New crop soybeans continue to find support from surging spot values to soybeans and soybean meal. What is going on with this market? What is needed to solve the tightness and when you suspect that it may occur?


Tight old-crop soybean supplies in combination with still-strong demand remain price-supportive for front-month soybean and soybean meal futures. That tight supply situation isn’t going to be cured until new-crop soybeans are available and the lateness of this year’s crop will likely push back the arrival of new-crop beans. The biggest difference between soybeans and corn is the impact record-high prices had on demand in those respective markets. Corn demand was dramatically cut by the surge to record prices last summer, whereas soybean demand declined only modestly. With a still-strong demand base, the soybean market has a better fundamental base than corn despite a very similar carryover outlook – tight old-crop supplies and an expected big build in ending stocks for 2013-14.


Q: As we stand today, December corn values are trading around $5.00. In your opinion, what will happen first, December corn trading to $4.50 or back up to $5.50? Why?

A: Traders are relatively comfortable with how the corn crop is developing despite the late start and plenty of concern among producers in key production areas. Because traders are currently comfortable with crop prospects, any realization that there are problems will likely come later rather than sooner. With the path of least resistance being down, it appears December corn futures are more likely to test $4.50 before they rally to $5.50. But with that said, we don’t see corn futures spending a lot of time at or below $4.50. In fact, the market may not even drop that far. The key is global end-user demand and at what price that demand surfaces. We’ve already seen China show up as an aggressive buyer on the first dip below $5.00 in December corn futures.


Q: There has been much debate regarding corn planted acres. Does Pro Farmer expect a downward revision to planted acres and if so, when might that appear in the USDA balance sheets?

A: Pro Farmer does not expect a downward adjustment to planted corn acres anytime soon. And it’s really harvested acres that count, as that’s the figure USDA multiplies the national average yield by to get total production. USDA is currently conducting a resurvey on planted bean acres in 14 states, but that will have no impact on corn acres. The next possible adjustment to corn acres would be the October Crop Production Report, when USDA’s National Agricultural Statistics Service (NASS) gets certified acreage data from the Farm Service Agency (FSA). At that point, harvested corn acreage could be cut, but USDA is already using a percentage (91.5%) that’s lower than the historical norm (92%), so some of the washed out and drowned out areas have already been accounted for in the current harvested acreage figure.


Q: The Pro Farmer Crop Tour kicks off in a few weeks. What are you most interested to see this year? Will there be any additional calculations taken this year to measure the lateness of this year’s crop?

A: The Pro Farmer Midwest Crop Tour runs Aug. 19-22. During that week, we’ll be checking roughly 1,100 to 1,200 corn and soybean fields across the Corn Belt for yield potential. This will be another interesting year as crop development is delayed, especially in northern Iowa and southern Minnesota, which had plantings severely pushed back by the very wet spring. Because of late maturity, it will make it harder to peg this year’s production, but those are the cards we’ve been dealt. We always run Tour the third full week of August regardless of crop maturity. Because of the late-maturing crops this year, how the growing season finishes will have a potentially big impact on final yields.

 

Have a question for Brian?

Contact him at bgrete@profarmer.com or 319-268-4349.


 

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