Market Analysis 

After this year’s previous quarterly US soybean stocks were above trade’s expectations, the upcoming USDA June 30 report will likely get more attention than normal.

This year’s first-half soybean processing & export demands were at record levels until the world switched its purchases & shipments to South America this past spring. Brazil’s sizable bean output & aggressive overseas sales have reduced US export shipments this past quarter, but they still remain on target for a record yearly level.

The US crush has also slowed, but it too could have a slightly higher record demand this year. May’s US (NOPA) processing pace posted a slight jump over last month at 163.5 million bushels (bu). This is the second highest pace for May historically, but it’s below last year’s 169.6 million bu. record. 

Overall, last quarter’s US crush appears to be 532 million bu. This is lower than last quarter’s 554 million and 2020’s 555 million spring quarter, but this year’s nine-month crush remains 16 million higher than last year at 1.644 billion bu. To reach the USDA’s recently lowered crush forecast (-15 million), this summer’s processing rate needs to be 530 million bu. This pace seems attainable given the current strong US pork and poultry prices, which should keep summer numbers steady to higher.

After Chinese purchases and South America’s planting & harvesting delays pushed US first half exports to 1.987 billion (343 million bu higher than 2016/17’s previous record), this past spring exports slipped to 175 million bu. With the US leaving this year’s exports at 2.28 billion, current sales are only 16 below this target & shipments are just 120 million or 40 million bu per month to reach this forecast.

Despite this year’s record first half overseas shipments, soybean’s quarterly residual levels have not reflected the normal transit bushels in previous years before 2018/2019.

What’s Ahead

The convergence of these bearish factors broke soybean prices this week:

1. Tough Fed inflation statement.
2. Sluggish weekly export sales.
3. Biden Administration hinting at bio-fuel relief for small refineries.
4. A large level of managed fund longs in markets lead to heavy stop-loss selling on a near-term US rainfall forecast, however major states' rains have been disappointing so far. Hold old & new crop sales at 90-95% & 20-25%.

This suggests 2020’s US crop size could have been underestimated. If the upcoming June 1 stocks are above 765 million bu, which this past quarter’s export, crush, and seed disappearances would project, the USDA will have to post a negative residual to note these larger available supplies.