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CME: Shockingly Small Year End Soybean Stocks

03 October 2014

US - Today is grains day, precipitated by yesterday’s quarterly Grain Stocks report from USDA and the 2014 harvest moving into a higher gear, write Steve Meyer and Len Steiner.

Some key items of interest are:

  • A shockingly small year end soybean stocks number of just 92 million bushels. Any more questions about why we saw soybean meal quotes above $600/ton over the past couple of months? The trade knew the number was low but had, on average, estimated it to be 126 million bushels. That figure would have been the lowest as a percentage of usage on record so this one sets that record in spades. The 92 million is the lowest number of bushels in inventory at the end of a crop year since the early 1970s.

  • To make that figure work and eliminate the sizable negative residual figure USDA has carried in the soybean balance sheet this year, USDA revised last year’s crop upward by 69.2 million bushels. The change was accomplished by adding 307,000 planted acres, 384,000 harvested acres and pushing the yield up by 0.7 bushes/acre to 44.0. Year later adjustments might strike one a bit oddly but they do call it a BALANCE sheet so it really needs to BALANCE.

  • The super tight year end soybean stocks figure raises two questions. First, do they imply that imports have been higher late in the 2013?14 crop year and during September, the first month of the 2014-15 crop year? Second, has an inordinate amount of early?harvested beans in the Southeast already been used? The lower stocks mean that the 2014 crop will have to get larger to keep 2014?15 year?end stocks at the 475 million bushels USDA estimated in the September WASDE.

  • New crop soybean meal futures have fallen by roughly $50/ton since September 1. The big break in the weekly chart is caused, of course, by moving to the October contract as the front month but every new crop meal contract is now below $300/ton. This provide a cost break for hog producers and a BIG cost break for poultry producers.

  • September 1 corn stocks were estimated to be 1.236 billion bushels, somewhat higher than the average pre-report estimate of 1.185 billion bushels and USDA’s September WASDE estimate of 1.181 billion bushels. All of these numbers, of course, dwarf last years year end stocks of 821. The increase in stocks will likely be removed from feed and residual in this month’s WASDE — especially since many (including us) have thought that figure was quite high relative to animals numbers this past year.

  • Corn futures are approaching long term support at $3.00/bushel pretty rapidly. That support dates back to 2009. it’s hard to remember that corn actually got that cheap after the initiation of the biofuels subsidies and mandates — but it did! Dec corn closed on Tuesday at $3.20-3/4 and is trading near $3.19 in early trading today. The Dec contract traded at $5.14 and closed at $4.98 as recently as May 9! The next technical support that we can see would be the 2005-2006 resistance level of $2.63. Pretty shocking that we’re even talking about that, huh?

  • This year’s crop is still lagging those of past years in terms of maturity and completion. USDA’s weekly Crop Progress report showed only 60% of corn mature compared to a 2009-2013 average of 70%. Just 12% of corn acres had been harvested as of Sunday. That figure, on average over the past 5 years, was 23%. Soybeans are closer to normal in terms of maturity at 69% versus a 5 year average of 71%. That fact that is quite understandable since daylight hours determine soybean growth and, last we checked, those don’t change much from year to year. Soybean harvest is lagging, however, with only 10% of acres completed versus a 5 year average of 17%. In general, southern states are about on schedule for both crops while Midwestern states are lagging.

TheCattleSite News Desk

Top image via Shutterstock



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