Pre-May US/World Soybean Update - Output Up, But Demand Keeps US Supply Tight

Market Analysis

With the USDA releasing their initial 2021/20 World and US supply/demand forecasts along with some old-crop revisions on May 12, S. America’s current soybean output will be a closely watched trade factor. China’s strong buying to cover their expanding feed needs after African Swine Fever devastated their pork output 2 years ago has already pushed US export sales to a record level. This spring’s less-than-expected US soybean planting intentions have also added uncertainty to this protein’s prices with dry soils surfacing in the N & W parts of the Midwest.
Last fall’s S American soybean plantings were delayed by dry-ness. Erratic growing season weather then reduced Argentina’s crop prospects while Brazil’s Mato Grasso region experienced heavy rains during March delaying its harvest. Lower Argentine (-1.0 mmt) & Paraguay (-0.2 mmt) crops could slip S. AM’s out-put while Brazil’s output remains unchanged at 136 mmt this month. Brazil’s larger area (1.7 million hectares) is the reason for S America’s larger output in 2021.
Similar to corn, US bean exports are extremely close to the USDA’s yearly forecast with 4 full months left in the crop year. At 2.252 billion bu., sales are just 28 million from the USDA’s 2.28 billion forecast. Interestingly, this difference is 4 million bu. tighter than 2012/13’s May 1 level. This may should prompt a USDA export increase, but they could also up US imports by a similar amount leaving old-crop stocks at 120 million vs a small drop the trade is expecting.
Given the limited rainfall in the W Midwest, 2021’s US soybean plantings are off to a strong start at 24% this week. This pace is above the 5-year’s 11% rate and bean’s 10-year average rate of .20% for early May. With 2 million of 2021’s 4.5 million higher US seedings located in the Dakotas, this region’s weather will likely be watched closely.
The USDA normally uses its Ag Outlook demand and yield levels along with its spring planting level for their initial new-crop balance sheet each May. Even with 150 million lower demand, this approach will project tight US stocks continuing into 2022. Higher US plantings could occur without a major price decline it seems given the world’s love of protein.

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Disclaimer – The information contained in this report reflects the opinion of the author and should not be interpreted in any way to represent the thoughts of any futures brokerage firm or its ...

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