Published on: 13:28PM May 20, 2009
Allendale Inc is not surprised by recent CBOT floor trade discussion regarding the potential for 2008/09 old crop soybean stocks to approach 75-77 million bushels. Within the last month nearly daily discussion took place of the eroding Argentina soybean crop, but with its harvest more than 90% complete and present Buenos Aires Grain Exchange production estimate of 32.8 million tonnes, it appears as though soybean bulls have switched pastures from Argentina to the US.
Presently USDA is forecasting 2008/09 end stocks of 130 million bushels which compares to its month of April estimate of 165 million bushel and year ago May estimate of 145 million bushels.
Allendale Inc would like to explore the potential for USDA to drop old crop soybean end stocks below 100 million bushels, let alone down to a level of 75-77 million bushels. If history is a good teacher we may only have to venture back to just last year as an example of what
tactics measures USDA may utilize in order to keep projected days of supply above the existing 16 which mirrors 2003-04 (see graph).
We can look back to the April 2008 WASDE to see just how quickly USDA was able to find an extra 77 million bushel of soybeans by reducing soybean residual use. Residual use may be defined as “reflects handling losses, on-farm extrusion of soybeans, and a statistical error term. Not only was USDA capable of discovering 77 million bushels of soybeans in its April WASDE to help offset the 55 million bushel of increased exports and 5 million bushels for crush, it went a step further in its July WASDE to post a negative 35 million bushel of soybean residual. USDA’s reasoning was for the -35 million bushels was the June 1, 2008 quarterly soybean stocks indicated a below average residual.
There you have it, simply stated USDA was able to discover an extra 113 million bushels of soybean supply within its “residual use” accounting column to possibly ensure soybean end stocks would not slide below 100 million bushels.
You may find it interesting, USDA presently has a rather “ripe” 73 million bushels of soybean residual use factored into the present balance sheet, just ready for its picking. The question is, just when could USDA harvest this particular residual? Will USDA hold out until the July WASDE, after its June quarterly stocks report or discover less soybeans were lost during handling, or on farm extrusion or chalk it up to an oversight statistical error, sooner? Remember, less than a year ago USDA was able to discover an extra 113 million bushels of soybean and if USDA decides to go statistically negative once more in 2009, may have room to discover as much as 109 million bushels at the stroke of a pen.
Questions remain, could USDA find the magic necessary to ensure adequate old crop end stocks within the next month or two? How could its decision impact your old crop and for that fact new crop marketing, or investment strategies?..........Joe Victor
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