By Jon Scheve, Superior Feed Ingredients, LLC
One year ago, the March ’21 soybean board was trading around $13, with projected U.S. carryout at 175 million bushels. Now beans are trading at slightly higher values, but U.S. potential carryout is at 340 million bushels.
There are concerns U.S. export pace isn’t high enough to meet current USDA estimates, and upcoming reports may show carryout levels increasing even higher. Plus, Brazil’s current cash values suggest they have a 30- to 50-cent price advantage over U.S. beans for shipments about a month from now when their harvest is fully underway. This may mean current price levels are not sustainable longer term.
If U.S. export pace was reduced enough for carryout to increase to over 375 million bushels, that would be 200 million bushels (or 4 million metric tons) more than last year. While early South American estimates are predicting a reduction of 4 million metric tons, it’s important to remember that Brazil’s total production alone was projected to be 6 million metric tons more than last year only a month ago.
Therefore, for the current bean rally to remain sustainable, it will require more production issues in South America. These would include:
- Further deterioration of Southern Brazil’s crop, which is nearing the end of its life cycle
- Additional heavy rains in Northern Brazil to slow harvest or open pods and hurt yields
- Sustained dry weather during Argentina’s upcoming growing season.
The next USDA report on January 12th will provide more information on the U.S.’s harvested yields and updated carryout values. It seems likely there will be more market volatility for the next few weeks.
Please email email@example.com with any questions or to learn more. Jon grew up raising corn and soybeans on a farm near Beatrice, NE. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans and other grains for the last 18 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 10 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.
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