Record Acres and Yields for Soybeans?
May 30, 2013
Soy traders don't seem worried about the record number of acres going in the ground, but seem extremely nervous about the potential "yield drag" that could be associated with late planted beans. Personally I believe its still too early to be counting on significant yield drags, especially with today's stronger varieties. Still, several in the trade will tell you beans planted after the end-of-May will actually start to experience a reduction in yield. Others believe mid-June is a more accurate yield reducing line-in-the-sand. Regardless, the bulls seem to have the trade spooked, and the current record yield estimate of 44.5 bushels per acre by the USDA is now being thrown under the bus. The trade is simply electing to believe its too late and too wet to get a record national yield out of this crop. I personally think the bulls are getting out over the tips of their ski's a bit. What some might be missing is that there is very little factual evidence to back up this major yield reductions this early. It sounds good in theory, but I just don't see conclusive evidence. Not to mention the new "hybrids," and how they will perform in these conditions is still somewhat of an unknown. Don't get me wrong, "yields" will ultimately be the determining factor for price, I am just thinking it might still be a little early to be shaving bushels.
One thing is for certain, the trade is definitely more worried and concerned about a potential "yield drag" than they are about "additional bean acres" going in the ground.
The reason why is somewhat simple: Even if we add 1.8 million more bean acres, a slight 1-bushel per acre drop in overall yield will basically offset all of those gains. Therefor on paper "yield losses" obviously looks very scary.
Lets play it out a little further: The USDA is currently assuming we will "harvest" 76.2 million soybean acres. For argument sake let's say that number jumps higher by 1.5 million acres (could be conservative), giving us 77.7 million total harvested bean acres. Let's further assume we see just a 1-bushel per acre increase over last years devastating yield of 39.6. This would give us 77.7 million harvested acres at a yield of 40.6 bushels, or in other words a total production number of 3.155 billion bushels. This is still some 145 million bushels more than last years total production.
Lets not forget about South America: Brazil looks as if they will harvest at least an additional 650 million bushels (66.5MMT's last year vs 83.5MMT's this year); Argentina looks as if they will harvest an additional 430 million bushels (40.10MMT's last year vs. 51.0MMT's this year); Paraguay is also harvesting a record bean crop and will have an additional 155 million bushels (4.35MMT's last year vs. 8.35MMT's this year)...
Bottom-line: Production setbacks experienced last year in South America was one of the main driving force for higher rices. With the South American crop essentially home-free, and very little chance for any type of repeat production problems, you have to believe the overall environment and landscape have drastically changed. Yes, the trade is currently scared in regards to US yields. I can understand to some degree considering the current delays and extended rainfall in the forecast. But when you start to put all of the puzzle pieces together I see a vividly bearish longer-term soybean picture. Moral of the story, be careful being too close to the trees to ultimately see the forest. Certainly prices can push higher considering the tightness in the old-crop and the upcoming roll by the funds, but in the end I have to believe traditional Supply & Demand wins out.
***I have heard several Ag professionals frequently comparing this year to 1993 when floods reduced corn acres by 2.2 million and beans gained 2.3 million. As of late though I have been hearing some very smart and seasoned Soy traders thinking this could be a repeat of 2009, when soybean prices peaked the first week in June at $12.91, then by the first week in October prices had fallen all the way back down to $8.79...
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