USDA's current soybean yield estimate of 45 bushels per acre is simply too high
Jun 04, 2014
Soybeans producers are wondering if the NOV14 new-crop contract can hold "technical" support at the $12.05-$12.06 area...if not there is continued talk about a potential free-fall into the mid to low-$11.00 price range. The fear is obviously a HUGE crop going in the ground here in the US.
It isn't as if we haven't seen this storm brewing on the horizon, but perhaps the trade is simply becoming more of a believer as the USDA shows better than expected planting progress and a pace now well ahead of our 5-year average.
In other words the thought of "harvested" soybean acreage north of 80 million is now a true reality. In fact harvested soybean acres in the US might end up north of 81 million acres... The bears are arguing if the weather continues to cooperate and we see limited crop-stress, we could end up swimming in soybeans.
Certainly pushing ending stocks well above the 160 million bushel average we have traded during the past five years, perhaps even doubling that number (a 320 million bushel ending-stocks number is not out of the question if growing conditions remain optimal). Throw on top the argument by the bears that South American soybean acres continue to push higher and so do yields.
The most recent data shows South America soybean acreage at around 137 million. Brazil at around 73.9 million and Argentina at around 49.4 million, the kicker is both combined are adding about 3.5 million NEW soybean acres each year.
If the US raises the bar and starts to more consistently plant 80 million plus acres and the growth in Chinese demand begins to slow in some capacity something will have to give...the bears obviously suggest it will be "prices."
The bulls are being forced to give-up on their acreage arguments, conceding to the 80 million plus figures, but continue to hold onto their arguments regarding yield. Their thoughts are the USDA's current yield estimate of 45 bushels per acre is simply too high, especially when you consider the record acreage that is being planted.
There is even new evidence floating around the trade that shows overall "yield growth" in the US is actually slowing down a bit. Rather than adding the 0.5 bushel per acre per year to our trend-line estimates, some are arguing that number needs to be reduced.
In other words technological gains that we have been experiencing the past several years might be starting to slow to some degree.