Soybeans Still Reeling Following USDA's February Supply & Demand Report

February 10, 2013 11:52 PM

What Traders are Talking About:

* Soybeans continue to fall. Soybean futures plunged following last Friday's Supply & Demand Report from USDA. While USDA cut its U.S. 2012-13 soybean carryover projection to 125 million bu., the agency modestly raised its global 2012-13 ending stocks forecast. Soybean futures are sharply extending last Friday's losses this morning as bears have technical momentum and bullish news is lacking. The demand front is expected to be quiet this week as China celebrates its Lunar New Year, although China will have international trading desks manned, meaning it's not impossible for them to buy soybeans (or any other commodity for that matter). If there aren't any positive demand developments, it will take South American weather to stop the price drop.

The long and short of it: Traders' focus has clearly shifted from strong demand for U.S. soybeans and tight domestic supplies to the coming record South American crop.

* South American weather update. Beneficial rains were seen across southern Brazil over the weekend. Rains also fell on central Brazil, further delaying harvest activity in Mato Grosso. The forecast calls for scattered rains through southern Brazil most days this week, while conditions are expected to be a little drier in central Brazil. In Argentina, rains fell late in the weekend across portions of Buenos Aires and Santa Fe. The forecast is mostly dry through Friday, but a rain event looks likely by the weekend. The 6- to 10-day forecast also holds some hope for precip across Argentina's grain belt.

The long and short of it: South American weather is adding to the price pressure on soybeans. Traders will closely monitor the late-week rain event to see how that develops as the week progresses.

* NCC: Cotton acreage to fall 26.8%. The National Cotton Council's (NCC) annual survey signals U.S. producers plan to seed only 9.01 million acres to cotton this year, which would be down 26.8% from last year if accurate. More than half of the planned acreage decline will be seeded to corn, with the remainder going to soybeans (many double-crop soybeans after wheat), according to the survey. Assuming harvested acres of 7.65 million and "state-level yield assumptions," NCC projects the 2013 U.S. cotton crop at 12.86 million bales versus production of 17.01 million bales in 2012. That would be the smallest U.S. cotton crop since 1983.

The long and short of it: Traders fully expected cotton acres to decline sharply, but the NCC survey signals the decline will be even sharper than anticipated. A Reuters poll of market analysts in early January pegged U.S. cotton acreage at 10.1 million acres.


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