Soybean Futures Get Some Relief from Short Covering on USDA Export Report Retraction

Soybean prices closed down 1.6% for the week in contrast to the other grains closing higher. However, on Friday beans posted solid gains after following other grains higher amid lingering concerns over U.S. production potential. A mishap in USDA export reports saw a short covering boost also. Continuous soybean futures closed down 1.8% Thursday and on Friday, they bounced back, with closing up 2.3%.

China continues to regularly draw down its imported soybean stockpile in an attempt to boost local supplies and tamp down high prices. Brazil is forecast to have a bumper crop this coming season.

Soybeans

Falling prices for crops could add to hopes that inflation could ease with optimism already there after this week’s CPI and PPI reports for July. World food prices have already declined by the most since 2008 this past July.

USDA’s release last month of the June 30 Acreage report had USDA took off 2.6 million acres from the March 31 soybean planting estimate, dropping it to 88.3 million acres. There is still deep concern is soaring fertilizer prices due to the war in Ukraine restricting the bullish production forecasts from major South American producers Brazil, Argentina, and Paraguay.

USDA Retracts New Export Report

The U.S. Agriculture Department’s Foreign Agriculture Service attempted on Thursday to roll out its updated system for reporting weekly export sales. The data release diverged wildly from expectations.

Grain traders surveyed by The Wall Street Journal this week, for example, expected sales of old and new crop soybeans—soybeans harvested last year and those growing in the fields right now—of 300,000 metric tons to 1.25 million tons.

Instead, the USDA reported sales of more than 5 million tons of soybeans—a figure that struck many traders as ludicrous.

The USDA retracted the report after the close of trading Thursday. In a brief statement, the agency blamed the wild figures on the move to the new system.

Soybeans Futures Highlights

  • September futures climbed 56.75 cents to $16.0925 Friday
  • November futures rose 33.5 cents to $14.6475.
  • Soybean basis bids sank 15 cents lower at an Ohio elevator and firmed 3 cents higher at an Illinois river terminal while holding steady elsewhere across the central U.S. on Friday.
  • Preliminary volume estimates were for 148,794 contracts, shifting slightly below Thursday’s final count of 162,607.

Soybeans Technical Outlook

Soybeans held the top of the cloud for a triple bottom sending it sharply higher to the breakdown and to be rejected harshly to the tenkan, off the Kijun and under the the 50 wma. Support at the Cloud gave way and we sit near the January breakup. On the way down soybeans rejected the Kijun and channel retest to spit back the 50wma. The weekly cloud and Murray mingle around the $14.6/bushel benchmark are massive.

Recall beans broke down from the bull pennant framed by +4/8 and +1/8 with the Kijun unable to sustain support right at the breakout. Support at the 50wma gave way to under the futures pivot at $15/bushel benchmarks and at the close of the week was a magnet to the recovery bounce. Pressure came from futures spitting the Weekly +4/8 over $17.50/bushel three times. The market needs to rebalance that energy.

Soybeans Weekly Chart via KnovaWave

USDA Weekly Inspections

The weekly Inspections report from USDA had 436,851 MT of soybeans shipped during the week of 8/25. That was down from 686.8k MT last week and compares to 387k MT shipped during the same week last year. 

August USDA WASDE Soybean report

USDA presented its first survey-based soybean yield forecast in this month’s WASDE report, pegging average yields at 51.9 bushels per acre. That was a monthly increase of 0.4 bpa. Analysts were expecting to see a 0.4 bpa decrease, in contrast. Production potential moved 26 million bushels higher to 4.53 billion bushels, with USDA explaining that higher yields more than offset lower harvested area.

Soybean USDA June 30 Acreage Report Highlights

Combined corn and soybean acreage fell 2.2 million acres lower than the earlier Prospective Planting estimates.

USDA took off 2.6 million acres from the March 31 soybean planting estimate, dropping it to 88.3 million acres. It now trails 2017 (90.2M ac.) and 2018 (89.2M ac.) as the third largest U.S. soybean crop on record.

The results for soybeans and wheat hinted at smaller than expected demand usage rates between March 1, 2022 and June 1, 2022.

Estimated soybean plantings increased 1% from a year ago, with 88.3 million acres this season. Analysts were much more bullish in their expectations, offering an average trade guess of 90.446 million acres prior to today’s report. USDA’s March estimates were also more aggressive, when the agency pegged the 2022 footprint at 90.955 million acres. USDA notes that planted acres are steady or higher in 24 out of 29 states.

South American Production Estimates

  • USDA’s new South American production estimates for 2021/22 firmed.
  • Brazilian production increased to 4.629 billion bushels,
  • Argentine production increased to 1.595 billion bushels.

Brazil

Brazil is the world’s largest producer of Soybeans and imports 85% of its fertilizers, mostly from Russia. The recent WASDE report cited strong export sales and a reduced export forecast for Brazil.

Brazil’s Conab reported that it expects to see a record-breaking soybean production during the 2022/23 season, climbing to an unprecedented 5.525 billion bushels. That’s due to an expected rebound in yields and a 3.5% increase in planted area, which could reach 104.773 million acres.

Canada

Production estimates from StatsCan show the canola crop should reach 19.499 MMT, up from 13.8 MMT last year (revised up from their prior 12.6 MMT figure). The trade was looking for StatsCan to report 19.6 MMT. For soybeans, Canada is expected to harvest 6.4 MMT, up from 6.27 MMT last year, and above the 6.2 average trade guess.

Argentina

Argentina has exported 1.4 MMT of soybean meal so far this month which puts the country on pace to ship 2.2 MMT. This is 400 K below both last month and a year ago.

The Argentine Agriculture Ministry reports producer sales of the 20/21 soybean harvest total 20.4 MMT as of mid-July, down 19% versus a year ago.

China

China’s agriculture ministry reduced its estimates for the country’s 2021/22 soybean imports by 2.1% to 3.344 billion bushels, citing lower demand amid hog herd losses. If realized, soybean imports will be down 8.8% from a year ago. Brazil and the United States are by far the top two suppliers.

China again plans to auction off another 18.4 million bushels of its imported soybean reserves on September 2. China has offered similarly sized auctions regularly throughout 2022 to boost local supplies and cool high prices.

Soybean Exports

The 2022/23 marketing year for corn and soybeans is right around the corner, starting on September 1. “There is a lot of optimism for the 2022/23 soybean export season,” according to Farm Futures grain market analyst Jacqueline Holland. “In early August 2022, outstanding export orders for the 2022/23 marketing year stood at 578.4 million bushels, over 1.3 times higher than the same time a year ago.”

EU Imports

The EU’s June crush volume fell 12% to the lowest level this year with 13% fewer soybeans at 1.2 MMT processed.

European Union soybean imports during the 2021/22 marketing year have reached 518.8 million bushels through June 19, which is slightly below last year’s pace so far. EU soymeal imports are also lower year-over-year, with 16.04 million metric tons.

USDA-ERS Report

Last month the USDA-ERS report shows soybean exports for fiscal year 2022 are now valued at $32.3 billion, with higher volumes more than offsetting lower unit values. This is a $1.0 billion from USDA’s prior February forecast and would be a record.

According to the U.S. Agricultural Export Development Council, a new study confirms USDA-Foreign Agricultural Service export market development programs boosted ag exports by an average of $9.6 billion annually from 1977 to 2019, representing 13.7% of total ag export value, and returning $24.50 in additional net export revenue for every dollar spent on export promotion.

The study was commissioned by the U.S. Grains Council on behalf of members of the U.S. Agricultural Export Development Council to evaluate USDA’s Market Access Program and Foreign Market Development program. MAP and FMD, which are authorized by the farm bill, are vital to providing opportunities to develop or grow demand for U.S. products in foreign markets.

Developed by IHS Markit in cooperation with Dr. Gary Williams and Dr. Oral Capps at Texas A&M University, both experts on evaluating the economic performance of trade promotion programs, the study updated a 2016 edition also evaluating MAP and FMD, which are currently authorized by the 2018 Farm Bill. The new study also took a first look at the impact of investments through the Agricultural Trade Promotion (ATP) program.

According to the U.S. Agricultural Export Development Council, a new study confirms USDA-Foreign Agricultural Service export market development programs boosted ag exports by an average of $9.6 billion annually from 1977 to 2019, representing 13.7% of total ag export value, and returning $24.50 in additional net export revenue for every dollar spent on export promotion.

The study was commissioned by the U.S. Grains Council on behalf of members of the U.S. Agricultural Export Development Council to evaluate USDA’s Market Access Program and Foreign Market Development program. MAP and FMD, which are authorized by the farm bill, are vital to providing opportunities to develop or grow demand for U.S. products in foreign markets.

Ryan LeGrand, USGC and CEO, says USGC was glad to lead in this effort to demonstrate the long-term impact of the market export programs. “We know from our history that our work helps, as our mission says, improve lives. This study helps us put numbers to those outcomes for our organization and our whole sector within the agriculture industry,” he says.

Developed by IHS Markit in cooperation with Dr. Gary Williams and Dr. Oral Capps at Texas A&M University, both experts on evaluating the economic performance of trade promotion programs, the study updated a 2016 edition also evaluating MAP and FMD, which are currently authorized by the 2018 Farm Bill. The new study also took a first look at the impact of investments through the Agricultural Trade Promotion (ATP) program.

“Our work indicated that MAP and FMD have accounted for 13.7%, or almost $648 billion, of all the revenue generated by U.S. agricultural exports between 1977 and 2019,” says Williams. “The additional export revenue bolsters the entire U.S agricultural sector and creates a multiplier effect throughout the U.S. economy.”

Effect of Higher Input Costs on Farmers

A recent report by the Agricultural and Food Policy Center (AFPC) at Texas A&M University shows higher input prices are having a larger impact on farmers than originally thought.

  • Net cash farm income on the representative feed grain and oilseed farms is projected to decline by an average of $534,000 from 2021 to 2022 across the 25 feed grain and oilseed farms.
  • Representative wheat farms face an average reduction in net cash farm income of $399,000.
  • Representative cotton farms face an average reduction in net cash farm income of $716,000.
  • Rice farms face the largest reduction in net cash farm income per farm at $880,000 and a per acre reduction of $442.

Compiled by Joe Outlaw, Ph.D., and Bart Fischer, Ph.D., co-directors of the AFPC.

COT on Commodities

  • Weekly CoT data showed managed money was buying soybeans through the week that ended 8/23, taking their net long 5k contracts higher to 104,471.
  • Commercial bean traders added hedges through the week, with a 19.5k OI increase and a 8,540 contract stronger net short to 145.9k contracts.

Commodity Round Up

Highlights

  • The Bloomberg Commodities Index gained 1.9% (up 25.6% y-t-d).
  • Spot Gold slipped 0.5% to $1,738 (down 5.0%).
  • Silver declined 0.8% to $18.90 (down 18.9%).
  • WTI crude rallied $2.29 to $93.06 (up 23.7%).
  • Gasoline sank 5.5% (up 28%),
  • Natural Gas slipped 0.4% to $9.30 (up 149%).
  • Copper increased 0.7% (down 17%).
  • Wheat recovered 4.4% (up 5%),
  • Corn surged 6.6% (up 12%).
  • Bitcoin fell $620, or 2.9%, this week to $20,658 (down 55%).

Source: USDA, Farm Progress

From The TradersCommunity Research Desk