Running Out of Soybeans?

Published on: 14:36PM Nov 29, 2013


Market Watch with Alan Brugler

November 29, 2013

Running Out of Soybeans?


At the current export sales pace, the US crushers will not be able to obtain the projected quantity of soybeans unless USDA finds larger production to report in the January Crop Production report. Of course there are also rumors that China is canceling or re-selling some of its extensive purchases, but they (presumably different firms) also continue to buy. Using the November WASDE estimates, the US only had an extra 50 million bushels to export before reaching pipeline supply levels. We should not be too hasty in reaching a full bull market conclusion. There is another possible outcome, hinted at in 2013. US origin beans can be heavily sold in the first half, with imports from South America as needed in the second half to fill in the hole. It might not be the most fuel efficient solution when looked at from a global perspective, and it doesn’t work well for crushers in the interior, but it has been done before.


December corn futures lost 7 cents for the week. Demand is a bright spot as low prices continue to work to cure low prices. Ethanol stocks dropped to the lowest reading since reporting began in 2010. Imports have been zero for the past 7 weeks, as US prices have been cheaper than those in Brazil. That has the industry optimistic about export potential. DDG exports have already been very strong. USDA reported strong corn weekly export sales of 1.01 MMT for the week ending November 21. Export commitments are already 71% of the newly revised USDA forecast for the year, hinting at another upward export revision in the future. The 5 year average commitment for this time would be 49%.


Soybean futures gained 1.3% this week to add to the 3% advance from the prior week. Weekly US export sales were a much larger than expected 1.77 MMT. China continues to aggressively buy US beans for 1Q14 delivery. A cancelation/switch announced this week won’t show up in the weekly totals until next week, but is just a shift from China to unknown.  Total US export Commitments as a % of total exports are now at 93%, which compares to 76% last year.  Profit margins for end users continue to provide a positive influence.  Soybean meal export sales continue to be very strong (and front loaded) with 55% of the projected sales for the year already booked. The average pace would be 38%.


Wheat futures were higher in Chicago and KC but MPLS continued to leak lower due to competition from cheaper Canadian wheat. Total US export commitments are still a larger % of the USDA forecast than usual for this date, currently at 75% vs. the five year average of 68%.  Weekly sales through November 14 totaled 562,200 MT.  

Cotton futures rallied a sharp 3.9% this week in the soon to expire December contract. The market worked through a few days of heavy deliveries, and now the remaining shorts appear to want out. Global ending stocks are still projected to be record large at 95.71 million bales. Weekly export sales for the week ending November 21 totaled 265,700 running bales of Upland Cotton for 2013/14 as well as another 30,400 running bales for 2014/15 delivery to El Salvador.  Pima sales were reported at 10,700 running bales. Commitments as a % of total exports (for upland cotton) are now at 63%, which compares to 60% for this point last year, and lagging the 5 year average of 68%.    















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Cattle futures rallied $2.00 this week, mimicking the $1-2 gains in cash cattle. Feeders were up $1.97 or 1.2%. Weekly slaughter was down 10.5% from last week due to the Thanksgiving holiday. Year to date beef production is down 1.2%.  Wholesale beef prices were down 1.96% on a Fri/Fri basis in the Choice, and down 1.11% in the Select. USDA reported weekly beef export sales of 9,500 MT.


Hog futures were up 0.06% for the week, i.e. a nickel. Pork production YTD is down 1.0% from year ago. Pork production this week was 11.5% smaller than last week because of the Thanksgiving holiday. Estimated week to date slaughter (including Saturday estimates) came in at 2.068 million head.  Year to date slaughter through 11 months is down 1.5%, with higher carcass weights offsetting some of the lost head count. The pork carcass cutout value was down $2.29/cwt this week, a 2.94% drop largely due to a 6.94% down-week for bellies.  USDA reported weekly pork export sales were a routine 8,700 MT. The poultry industry continues to expand, with egg sets and chick placements up 2% vs. the same week in 2012.


 Market Watch

We turn the calendar to December, and the year end portfolio adjustments by the funds start to kick in. The formal report lineup is fairly thin for the week. We’ll have USDA export inspections on Monday. Weekly Export sales will be on Thursday morning. Friday will mark the expiration of the December cattle options. Friday will also be the last trading day for December cotton futures.


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