Analysis: Keep An Eye on USDA’s Export Forecast for Soybeans

Soybean Markets 061620

There have been some big buys of U.S. soybeans in June. Analysts say it’s something to watch. 

Export sales have been a really fantastic component to give the market some confidence,” says Naomi Blohm with Total Farm Marketing.  

Pro Farmer reports new-crop sales last week rose to 1.38 MMT with China buying more than 1 MMT. Old-crop sales were at the low end of the trade estimates, and 36% below the prior four-week average with China taking almost 60% of the total.  

“If we are to believe China is going to take any shot to hit these trade deal targets, a lot of people would say that they are not, but if you want to take the optimistic view and say they are going to at least make an effort, it could be very positive for soybeans,” says Joe Vaclavik of Standard Grain.  

U.S. Trade Ambassador Robert Lighthizer discussed China and other countries in his testimony before the House Ways and Means Committee earlier this week. The committee asked Lighthizer if China had provided any signals that they are prepared to hold up their end of the bargain when it comes to making purchases of U.S. ag products.  

At this phase, Lighthizer predicts China is in the $10 billion or more range. “As recently as last week, they bought a half a billion dollars’ worth of soybeans, for example,” he explains. It’s something we are monitoring very closely. Secretary Perdue and I, we kind of have a methodology to get a handle on it because the data isn’t designed to tell you what one country is doing in a purchase context. It’s more shipments and the like. Every indication is, in spite of this COVID-19, they are going to do what they say.” 

American Farm Bureau Chief Economist John Newton has been tracking ag exports to China.He says there's still work to be done. 

“If we look at historical trends on how much we normally ship to China by this point, we’re about 60% behind where we need to be to reach the Phase 1 [trade agreement] target,” Newton says. “I know a lot of people in the trade are looking at the fourth quarter of 2020 as our opportunity to really achieve those Phase 1 targets.”  

Newton says the protein sector has seen positive impacts from the Phase 1 agreement, including new plants approved for export and sharply higher exports of pork and poultry. 

When it comes to soybeans, Pro Farmer says USDA confirmed big new sales to China in the week prior to June 11 but did not report any new large sales under the daily reporting program.  

Blohm says USDA forecasts export demand for the new crop will be more than 2 billion bushels next year 

“That’s really, really encouraging. The lower dollar will help as well,” she adds 

Vaclavik is watching USDA’s export demand forecast too. 

“I think you can make a bullish argument for the soybean market based on what we know right now,” he says. “USDA is projecting ending stocks in the U.S. will decline quite a bit following the 2021 marketing year.”  

Listen to both of their analysis clips here.