Will we run out of soybeans?

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Bargain basement prices may have allowed US soybeans to become a rare commodity in future months.  While soybean prices have faded with the prospect of a large South American crop, too many of them may have been sold and domestic soybean users will have either very high prices to pay before the 2013 US crop is harvested, that is, if they can be found at all.  That includes large soybean processors, as well as small livestock feeders who pick up a truckload of soybean meal now and then for swine rations.  It is hard to believe, but that is the way supplies are shaping up.

For the past couple of months, market analysts and a variety of commodity traders have been putting up red flags, warning that excessive volumes of soybeans are being exported, particularly to China, while the short crop of 2012 may have difficulty supplying domestic needs at the end of the marketing year. 

Now, University of Illinois agricultural marketing specialist Darrel Good has joined the growing crowd, but has also attached some strategic analysis to the warnings.  Good says the USDA’s March 28 report on Quarterly Grain Stocks may show soybean stocks at the lowest level for a mid-year report since March of 1989 when it reported on supplies remaining from the drought-shortened crop of 1988.

He says, “The market was willing to let consumption proceed at such a rapid pace in anticipation of a seasonal slowdown in export demand during the last half of the marketing year when South American supplies become more abundant. With prospects of a sharp rebound in South American production to a record level in 2013, it has been anticipated that the slowdown in consumption of U.S. soybeans would be sharper than normal this year and that year ending stocks would be maintained at pipeline levels.”  He says if the US has sold too many soybeans, and the pace has to slow down, it will require prices to move higher to achieve that adjustment.

Good works through a complex analysis of historical use patterns for soybeans, factoring in known quantities and solid estimates for unknown quantities to derive his projection for what the USDA may report at the end of the month.

Included in his calculations:

  1. Five million bushels of imports are included.
  2. Export estimates by the Census Bureau and USDA have to be reconciled, since they do not agree. He calculates 525.6 million bushels of exports during the second quarter of the year.
  3. With the Census Bureau no longer reporting domestic crush estimates, Good reconciled USDA’s annual estimates with what the National Oilseed Processors were estimating for their membership.  He says the crush is likely close to 475.8 million bushels.
  4. When crush and exports are subtracted from total consumption, the remainder is considered to be feed, seed, and residual use of soybeans.  Looking at history for the past couple of years, he calculates that at 40.8 million bushels.
  5. Total consumption is projected by Good at 1.0422 billion bushels, leaving March 1 stocks at 928.4 million bushels.

With USDA’s pipeline for ending stocks needing some 125 million bushels, there will only be 813 million bushels available for consumption during the final six months of 2013.  He says consumption in 2012 for the same period was 17% larger than the 813 million bushels we will have left, and the rate of consumption will have to be cut by 33% during the last half of the marketing year.

Good says the potential need to do a better job of rationing supplies along with the estimate of soybean acreage will both contribute to soybean prices for the remainder of the marketing year.

Summary:

The pace of soybean exports has been quite high, in relation to the relatively short soybean crop of 2012. With relatively strong domestic crush of soybeans, the stocks expected to remain available at the end of the month could be the least since March of 1989, which had to ration the short crop of 1988.  Combining exports, domestic crush, and feed-seed-residual, the remaining soybeans on hand in US bins could be 813 million bushels, which would require a 33% cut in consumption compared to last year, if supplies are to hold by the end of the marketing year.

Source: FarmGate blog


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