A string of new crop soybean export sales last week is a welcome sign for the soybean market. The weekly total was nearly 66.5 million bushels (mb) purchased by China, Mexico and unknown destinations. Plus, China bought another 4.85 mb on July 31. Market experts think its tied to China and the rest of the world becoming concerned about the size of the U.S. crop as we go into the critical August reproductive time for beans. It may also be a currency play. However, U.S. soybean exports are woefully behind normal for this time of year so that may be why the market didn’t get a more bullish price reaction.
Global buyers are closely watching U.S. soybean crop development. The balance sheet is tight with only 83.5 million acres. Plus, only 54% of the U.S. soybean crop rated good to excellent and the U.S. drought monitor showing 53% of soybeans under some level of drought. That’s nearly double of last year according to Mike Zuzulo, Global Commodity Analytics.
He says that is a concern. “I think that’s the next step in this puzzle because we are getting closer to the end of the month. I would think that the trade would start thinking about the next WASDE report. The Chinese probably already are.”
U.S. new crop soybeans have also become more price competitive recently for global buyers according to Zuzulo. “These unknown sales are being expected to be from China that suggests that China’s back in the game that Brazil’s price is too high. Brazil’s price is high in part because the dollar is at a 13-month low against the Brazilian Real.”
Last week’s sales bring year to date new crop soybean export bookings up to 7.2 million tons. But this is down 35% from the five-year average pace. And Rich Nelson with Allendale, Inc. says China has only booked a little more than 3 million metric tons of U.S. beans. “Keep in mind that last year was 8 mt at this time, the year before was 4.4 at this time so I still have concerns that while we are getting sales, they’re probably not at the level we need to be at here. So, we do suggest that in 2 to 3 months USDA will be taking a more serious discussion on the export sales issue.”
Nelson says USDA’s current new crop goals is just 8% lower than average so he thinks the agency will need to lower exports by 100 to 200 million bushels sometime this fall.
