USDA's May Report Further Feeds the Bulls as Soybean Supplies Remain Scary Tight

As soybean supply concerns continue to impact the market, USDA’s fresh look at 2020/2021 ending stocks in the May WASDE report paints a scenario where soybean supplies will remain extremely tight.
As soybean supply concerns continue to impact the market, USDA’s fresh look at 2020/2021 ending stocks in the May WASDE report paints a scenario where soybean supplies will remain extremely tight.
(Source: WASDE; Graphic: Lindsey Pound)

As soybean supply concerns continue to impact the market, USDA’s fresh look at 2020/2021 ending stocks in the May World Agricultural Supply and Demand Estimates (WASDE) report paints a scenario where both soybean supplies will remain extremely tight.

USDA’s report released Wednesday shows estimated old crop ending stocks for soybeans at 120 million bushels. That’s a drastically different story from the May 2020 WASDE report, where USDA projected the 2020/2021 soybean ending stocks to reach 405 million bushels. USDA’s soybean projected farm price is $13.85 per bushel, compared with $8.20 in the same report last year, with USDA citing farmers are already pricing fall delivery above $14 in some locations.

The latest WASDE report also puts old crop corn ending stocks at 1.257 billion bushels, a large cut from the 3.31 billion bushels USDA projected for the new crop in the same report last year, which was the highest since 1987. Based on the revisions, USDA is projecting a farm price of $5.70 per bushel, which is up significantly from the $3.30 per bushel projected in May 2020.

Still, how did the 2020/2021 crop picture change so drastically and so quickly? University of Missouri extension economist Ben Brown points it all comes back to supply and demand. 

"I like remind people we took 1.8 billion bushels out of the supply picture for this corn crop that we've got in the books right now," says Brown. "At the same time, we've seen some increases on the demand side even just since February, of about 550 million bushels of corn exports added to that demand side largely due to the Chinese buying sprees that we've seen."

The soybean supply picture also changed in just a year. And based on planting progress and today's corn prices,  Brown says soybeans may be losing the battle for acres right now, which would support continued tightness in soybean supplies moving forward. 

"Soybeans has a very bullish story to tell," says Brown. "And, certainly, I think that will continue to support prices. We've seen this being played out in the markets the last couple of weeks, it is tight, and soybeans are now fighting to retain the acres that they can't lose, they have acres, they can't give up. They're even fighting and frankly losing the battle of even maintaining the acres that they have. So, they have work to do. And the market, especially end users are going to continue to have to bid premiums to bring this product in."

Brown points to the latest USDA Crop Progress report as one reason soybeans may be losing acres this year. 

"You look at Iowa and parts of Minnesota, and they're basically done planting," says Brown. "That, plus the fact that corn prices have really picked up some momentum compared to soybeans within the last month, certainly it leads us to believe that soybeans is got some more work to do to even keep the acres, that we thought were going to be in soybeans, in soybean production."

USDA’s first look at new crop shows the agency is expecting higher prices to ration demand, with USDA calling for slightly higher stocks and lower use. USDA projects 2021/22 U.S. ending stocks to climb 250 million bushels from last year, at 1.5 billion bushels.

With lower beginning stocks, USDA’s 2021/2022 outlook for soybeans shows supplies will remain tight at 140 million bushels, data that could continue to add bullish sentiments to the markets. 

"In times like this, I tend to say the market looks through things in a bullish lens," says Brown. "And so at this point in these bullish market cycles, you almost have to do something that changes the mind and changes the perception. This report did not change the perception. And while we could sit here and pick up part of the details, it just did not change the perception. So maybe we didn't feed it. But we certainly didn't change the perception. And that's that's going to be what the market looks and trades for another month."

The soybean market is holding most of its gains heading into the report’s release, with old crop trading more than 30¢ higher midday Wednesday. Corn prices were mixed, immediately falling lower before regaining some momentum and then falling lower again.

 

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