Soybean Outlook
Soybean OutlookLarger Brazilian output earlier this month and a firmer U.S. dollar have kept soybean prices on the defensive the past few weeks. Concerns about China delaying or switching purchases to new crop have also hung over the market as the trade awaits the USDA's June 30 acreage and quarterly stocks reports.
The latest U.S. Census crush for May was slightly better than expected at 128 million bu. However, poor processing margins curtailed processors normal seasonal increase in output last month and reduced this year's crushing rate to just 8 million bu. ahead of its seasonal pace to reach the USDA's outlook vs. 17 million advantage last month. This year's March-May crush was 396 million vs. 2010's 425.6 million level. This has prompted concerns about the 1.65 billion crushing being revised downward, but only 379 million needs to be crushed this summer (126.5 million per month) to achieve the current forecast. This outlook will be under scrutiny.
This year's soybean export shipments have also been lackluster the past 6-7 weeks. This past quarter's shipments appear to be 233 million, up 16 million last year, but the final 13 weeks of this crop year need to average 10 million bu. to achieve the USDA's current 1.54 billion foreign demand outlook. Overall, this past spring's demand was 719 million bu. when utilizing 90 million for seeds similar to last year and just 15 million lower than 2010's pace.
After last quarter's record cumulative residual level, the USDA upped this year's ending level by 20 million bu. to 36 million. This year's June 1 stocks need to be at 610 million bu., down 80 million, to be on track for this forecast. However, the past 6 year's average decline in this residual has been about half that level 41.5 million. Because of this relationship, we are using a 55 million quarterly residual level making our June I stocks estimate 585 million bu. If this level or lower occurs, the USDA may have to increase their yearly residual another 20-30 million when they update their supply/demand ideas on July 12. This adjustment suggests that 2010's harvest was likely overestimated by 0.5 bu. in yield, but this change won't happen until soybeans' final ending stocks on September 30.
The impact of 2011's delayed spring plantings for feedgrains & wheat is the potential for expanded bean acres. However, 2011's insurance will pay 60% of total coverage if you weren't able to plant by their prevent plant dates which occurred in the ECB & NW Corn belt. Because of this factor, only a 300,000 increase in U.S. bean seedings to 79.9 million is expected. Flooding on the lower Mississippi and now the Missouri Rivers will likely cut harvested acres advance to 50,000 acres. Late plantings can also reduce yields, but this impact might not occur until August.
This week's acreage and stocks reports imply S&D changes, which the market will quickly digest vs. estimates, but the USDA changes won't occur until July 12. The weather outlook will also be important for the first half of July, but prepare to finalize 2010/11 sales in $13.60- $13.75 area. Hold new-crop marketing at 40-45% at this time.
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