Sept. 30 – Soybean Stocks Dip Ahead of Harvest

Soybean stocks in the US have dropped before harvest, according to the USDA. Also in this week’s digest, we investigate shifting Canadian crush profits.

Current Sales Position:

We are 16.5% sold in 2018/19 old crop soybeans.

We are 0% sold in 2019/20 new crop soybeans.

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Good morning,

Soybean prices finished the week slightly in the red as harvest and trade pressures continue to hit the crop. The quarterly stocks report and annual update on production and yields provided very little bullish news, as prices fell by a full 1% on Friday afternoon.

For the week, November soybean prices shed 0.2% to finish just above $8.45 per bushel. The January 2019 contract shed 0.3% to close the week just under $8.60 per bushel.

Soybeans Prices Weekly Performance

Soybeans Prices Monthly Performance

Soybeans Prices Quarterly Performance

Managed Money on the Move

On Friday, the CFTC released its weekly update on managed money’s activity. As of September 25th, hedge funds maintained a net short position on soybeans at 58,614 contracts.

Soybeans Futures Funds Position

Hedge funds had increased their position this week by 11,199 contracts.

U.S. Soybean Stocks Dip Ahead of Harvest

On Friday, the USDA released its quarterly stocks report.

The agency said that soybean stocks came in 438 million bushels for September 1. That figure is up 45% from one year ago when soybean stocks sat at 301 million bushels.

The agency said that old crop soybean, on-farm stocks came in at 101 million bushels, which is up 15% from one year ago (87.9 million bushels).

Commercial stocks came in at 337 million bushels, up 58% from the same time last year (213.6 million bushels).

Total soybean stocks decreased to 781 million bushels from the 1.22 billion bushels reported for June 1 during the second-quarter report. That total disappearance is an 18% increase from the same period last year.

Soybeans Crop Quality Update

The USDA reported the quality of the U.S. soybean crop last Monday, saying that 68% was rated good-to-excellent (G/E).

US Soybean Crop Conditions

That figure is up 1 point from the previous week but up 8 points compared to last year and 5 points above the 5-year average.

Soybean falling leaves were pegged at 71% this week, up 8 points compared to the same time last year and 14 points compared to the 5-year average.

We are also tracking the second week of soybeans harvest progress. As of last Monday, 14% of the US soybeans crop has been harvested. This is up 4 points compared to the same time last year and up 6 points compared to the seasonal average.

US Soybean Harvest Progress

Going into this week’s report, the seasonal average for soybeans harvested is 26%.

The U.S. Farmer Remains in China’s Gunsights

While inventory levels drew the big headline on Friday, it was the ongoing trade spat between the United States and China that continues to drive market sentiment.

Last week, the U.S. slapped 10% tariffs on $200 billion in Chinese goods, a move the quickly led to retaliation (although on a much smaller level) by China. The Trump administration says that the U.S. will raise those tariffs to 25% by the end of the year unless a deal is reached between the two countries (read: China caves on intellectual property issues).

The general consensus is that no deal will be reached by the Midterm elections.

And China is trying to influence both the election and public opinion. Earlier this week, China’s largest English-language, state-owned newspaper took out a four-page advertisement in Iowa’s top-read newspaper. The advertorial offered harsh criticism of the TRump administration and cited economists critical of the nation’s trade policy.

Given Iowa’s huge soybean crop and its presence of the Republican voting base, China is hoping to sway public opinion. In addition, Iowa University reported that farmers could lose roughly $600 million due to ongoing Chinese tariffs on U.S. soybeans.

Changing Soybean Flows

As we recently noted, Argentina has been buying up U.S. soybeans while China picks up as many South American beans as possible. That has created a new arbitrage opportunity for traders across the southern continent.

This week, Brazilian grain trader Agribrasil said that Brazil is likely to import roughly 1 MMT of soybeans as local supplies decline. That would be the first time that Brazil has ever needed that many U.S. beans to meet demand.

That is part of the new flows we’re seeing as Brazil could hit 80 MMT in soybean exports, according to Agribrasil.

The Rosario Board of Trade said this week that it expects Argentina’s farmers will increase farmer acreage for corn by just 2.6%. That figure is down from the previous 6% estimate that it projected in the face of a big export tax rate. Even though soybean tariffs remain in place in order to help the country stabilize its debt problems, soybean production is still expected to remain robust as China continues to buy up supply.

So where are U.S. beans going?

The European Commission said that the U.S. represents 52% of the economic bloc’s soybeans this year. That figure is well ahead of the 25% market share during the same period last year.

U.S. Soybeans Hit the Open Market

On Thursday, the USDA reported net sales of 870,700 MT for 2018/2019.

For 2019/2020, the agency reported net sales of 1,500 MT for Japan.

For the week, the agency reported soybean exports of 819,200 MT.

US Soybeans Weekly Exports

The top five destinations for U.S. soybeans were Spain (104,600 MT), Mexico (103,300 MT), the Netherlands (103,200 MT), Egypt (81,800 MT), and Saudi Arabia (72,000 MT).

This week, we saw reports of 672,000 MT in soybean sales to Mexico. That would be roughly 1.1% of the total exports for the year.

While China continues to avoid the U.S. market, Taiwan surprisingly stepped up and pledged to purchase 3.9 MMT of beans in 2018 and 2019 from farmers in Iowa and Minnesota. This week, the delegation said that it will purchase up to $1.56 billion in beans from both states.

It is uncertain if such an agreement could anger China, which has been involved in a geopolitical standoff with Taiwan since the 1940s. Taiwan has sought its autonomy, while China seeks to one day bring the breakaway province back under their rule.

Canadian Crush Looks Stronger

On Wednesday, Statistics Canada released its monthly report on soybean crush volumes in the Great White North, which showed some strong numbers.

Despite ongoing margin pressures and proximity to the oversupplied U.S. soy oil market, StatsCan said that 168,539 MT of beans were used in August.

That figure was a 16.5% jump from July. This number is 23.7% higher than the same period in 2017. Statistics Canada does not have enough data to provide a 5-year average. However, we can note that the August soybean crush was 6.2% ahead of the 3-year average of just under 159,000 MT.

For more on this report, read our recap from Wednesday afternoon.

Where Soybean Prices Go from Here

The macroeconomic factor that slipped under the radar this week was the Federal Reserve’s decision to raise interest rates for the third time in 2018. The central bank could again raise rates in December as it attempts to curb inflation and keep the U.S. economy from overheating.

With that in mind, higher rates have negative impacts on the bottom lines of farmers and weigh on grain prices. This week, we dug into the three major factors that you’ll need to know about higher rates and what they mean for grain prices. Read our insights, here.

With trade and harvest pressures dominating the headlines, we’re looking for any signs of optimism in the weeks and months ahead. Stocks numbers this month reiterated the news we had already accepted — the U.S. is awash in soybeans and the 2018 harvest is going to bring even more supply.

Seasonally, soybean futures tend to move lower during the first week of October. After that, we do see a bit of a bounce, but this year is much different than periods past.

Soybean stocks vs. prices (US)

Looking ahead, we’re hoping for some hot, dry weather in South America. But it will be a while before we see forecasts that could possibly move the needle. Hang in there…

To growth,

Brennan Turner
President | CEO

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306-715-4540 (cell)

b.turner@farmlead.com

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FarmLead – North America’s Grain Marketplace

GrainCents

 

 

Sept 26 – StatsCan Says Canadian Soybean Crush Still Strong

Sept. 23 – Can Soybeans Find a Bottom? – Soybeans GrainCents Weekly Digest

Sept. 19 – StatsCan’s Satellites Update Soybean Yields to 44.1 Bushels

Sept 16 – WASDE Soybean Yields Point to Record Crop – Soybeans GrainCents Weekly Digest

Sept. 12 – September WASDE Report: Record Soybean Yields Bring Record Crop

Sept. 9 – September WASDE Preview for Soybeans Prices –  Soybeans Weekly GrainCents Digest

Sept. 2 – Farmer Aid Fuels Soybean Price Slump – Soybeans GrainCents Weekly Digest

August 31 – 7 MMT of 2018 Canadian Soybean Production

August 26 – Stormy Soybean Prices – Soybeans Weekly GrainCents Digest

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.