USDA Report Shows Demand for U.S. Soybeans

May 10, 2016 12:43 PM

Markets soared Tuesday on the release of bullish exports in USDA’s World Agricultural Supply and Demand Estimates, analysts said.

South American weather woes and a softer dollar are leading to stronger demand for U.S. corn and soybeans, according to USDA's May numbers.

“For the short term, it is bullish, and the market is reacting,” said Rich Nelson, chief strategist for Allendale. July contract soybeans closed more than 57 cents higher on the day to a closing price of $10.84. July corn also moved up 12 cents to finish at $3.81, according to traders.

“The world demand keeps growing for soybeans, and USDA expects it to increase next year,” observed Nelson.

"The report moved the market up a lot today,” agreed DuWayne Bosse of Bolt Marketing in Britton, S.D. “USDA increased demand more than expected.”

Analysts noted, however, that the report, while largely in line with large funds’ positions, is focused on estimates for future crops, not all of which are yet planted.  When it comes to U.S. soybeans, for example, 75% of the crop is not yet planted, according to Bosse.

Much of the increase in demand may depend on the impact of South American crops. “The main question is if the decrease in South American crops will help that much,” cautioned Nelson.

Here are some key numbers from Tuesday’s report:

Corn:  New-crop ending stock estimates of 2.153 billion bu., which is slightly lower than the average trade expectation of 2.294 billion bu. Exports were also raised 175 million bu. due to reduced competition from South American crops. USDA also noted stronger demand for ethanol as well as feed and residual use.

Soybeans: New-crop ending stocks of 305 million bu., which is significantly below the average trade estimate of 405 million bu. Soybean exports and crush are expected to increase in 2016.

Wheat: New-crop ending stocks of 1.029 billion bu., which would represent the highest U.S. wheat ending stocks since the 1987/88 crop year. The figure is also slightly higher than the average trade estimate of 997 million bu.  All-wheat production is estimated at 1.998 billion bu. in 2016, thanks to a drop in acreage.

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