Despite ongoing unease about waning Chinese interest in the export channels, soybean values have firmed over the past few weeks as building concerns about possible reduction in both the US planted area and national yield have surfaced to provide support to the soy complex's values. As this year's delayed US seeding period advances into late May and now early June, the possibility of producers taking less insurance coverage by planting by the prevent date or taking their insurance buyout payments vs. switching their delayed seedings to soybeans became a common refrain within the farming community. The upcoming June USDA updates on June 9 usually are just supply/demand revisions of old-crop and minor new-crop demand adjustments. However, many in the trade seem to be anticipating clarification about the size of 2011/12 crop sizes, which could lead to some disappointments if the USDA doesn't make any changes to last month's outputs that were based upon this year's March 31 Prospective Plantings levels.
With the trade's focus switching to new-crop because of 2011's slow planting season, this past week's 17% advance in U.S. pace to 68% was about what was expected given producers were still concentrating on finishing up their late corn planting in the northern and eastern areas of the Midwest. The concern is that soybeans, which have averaged 82% seeded by early June over the last 5 years, will now have their final 30% of the crop pushed into the more stressful portion of their growing season potentially reducing 2011's output too. Because of this year's late seedings, 7.4 million acres in northern areas of the US could now also be threatened by freezing temperatures this coming fall, 9.7% of this year's plantings.
After two disappointing processing months in the February to April period, the USDA could slice 10-15 million bushels off this year's soybean crush demand as higher DDG utilization in poultry and swine rations this year slipped this demand level this month. With U.S. soybean inspections averaging just 9.3 million bu. per week over the past two months, some concerns have surfaced about old-crop export demand needing to be scaled back further. However, with just 23 million bu. to sell to meet the USDA's current 1.5 billion forecast, which they revised downward just last month, the Feds may wait another month before deciding to slip this demand level again.
This week's decision by Beijing to drop their domestic price cap on soybean oil prices could also re-stimulate Chinese processor demand that has been muted by poor margins while this cap has been in place since last winter. Overall, a 10 million bu. rise is expected in soybeans' old-crop stocks to 180 million bu. on the upcoming USDA June supply/demand revisions. This larger beginning stocks level for the 2011/12 crop year just ends up as a 10 million bu. larger carryover since new crop's demand levels have a good chance to be left unchanged until more is known about the US and South American crop sizes for 2011/12.
With rains reappearing across the northern US later this week and across much of the Midwest next week, the final stages of this year's soybean plantings could be a struggle. Hold your final 10% of old –crop inventories and keep your 2011/12 sales at 40-45% at this time.