What Happens If and When the US Runs Out of Soybeans?
Aug 13, 2012
As you may already know, soybeans improved slightly in this week's Crop Progress report. The "Good-to-Excellent" rating was pushed 1% higher to 30% while the "Poor-to-Very Poor" rating was pushed 1% lower, and now stands at 38% of the US crop. Most of the improvements are due to improved temperatures and decent rainfalls across the midwest last week.
Soybean balance sheets longer-term are increasingly more difficult to solve. You have to believe with Chinese crush margins starting to turn positive and a more dire shortage of meal in Brazil, China and other parts of the world, we are on the brink of a major shortage. What I am trying to tell you is that with crushing plants in Brazil closing down (no beans to crush) and the world continuing to hold out their hand begging for more high protein, this market could absolutely explode! The bears can sit and talk all day long about the improved US weather models, but is that really going to matter in the grand scheme of things. US soybean production below 3.0 billion almost ensures a global shortage of soybeans and extreme price rationing will be needed. So the the difference of 35 to 38 bushels per acre really has no long term affect. Any way you slice it, the world is going to be in short supply of meal. The bears can also jump up and down all day long about the record number of soy acres going in the ground in South America. My question is when we sell out here in the US (which it is going to happen), and the entire world is on Brazil's doorstep begging for soybeans and meal, how will they possibly get the supplies out quick enough to those in desperate need. You know the logistical nightmares that importers have to deal with out of South America. It's not an issue when you traditionally have the US available to back up orders if the supplies don't get out of South America. Understand what I am telling you, the US is not going to be there to back up South America. South America will be left to supply the world with soy exclusively on their own. I know they have come along way with production, but I don't see a snowballs chance in hell they can logistically get the beans from the fields, to the ports and out the door in a timely fashion to supply the entire world with need inventory. Let me ask another question. What happens when the US runs out of soybeans (which we will at some point in 2013) and we are forced to import supplies from Brazil? Do you really think soybeans imported into the gulf will make there way up to Illinois, Iowa, North Dakota, etc...? There is no way. Crushers to the south will be bidding and gobbling up every bushel that comes into the country. Livestock producers closer to the ports will have first right of refusal. Those to the north will simply be left to fend for themselves. What will they feed when corn is in limited supply, the ethanol plants have been shut down and there are no DDGS available??? My hunch is if and when that time comes, soybeans in those parts will be like gold.
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