Soybean Futures Hold onto Gains from Bullish WASDE Report

Soybean prices fell Friday but managed to close higher on the week. Nov beans ended the week a net 36 1/4 cents higher (2.6%) from Friday to Friday. For the week Nov soybeans was 2.6% higher, October soymeal was 3.6% higher and soybean oil was up 3%.  USDA’s September WASDE report concluded the U.S. ending stocks estimates were bullish for soybeans. The world ending stocks estimates were seen as also bullish for soybeans. Soybean yield was cut 1.4 bpa to 50.5 bpa.

Soybeans

FAO World Food Price Index Fell in August for Fifth Consecutive Month

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 August.

Food prices have reversed sharply after being almost vertical for the past year, world food prices as measured by the FAO Food Price Index fell for the fifth consecutive month in August. The index was down 2.7 points (1.9%) from July, however remained 10.1 points (7.9%) above its value a year ago. At 138.0 the index is well under the record high 159.7 from March. Price falls were seen in all the five sub-indices of the FFPI in August, with monthly percentage declines ranging from 1.4 percent for cereals to 3.3 percent for vegetable oils.

FAO Vegetable Oil Price Index

The FAO Vegetable Oil Price Index averaged 163.3 points in August, down 5.5 points (3.3 percent) month-on-month, pushing the index value slightly below its year-earlier level. The continued decline of the index was driven by lower world prices of palm, sunflower and rapeseed oils, which more than offset higher soyoil quotations. International palm oil prices fell for the fifth consecutive month in August, driven by increasing export availabilities from Indonesia, mainly thanks to lower export taxes, as well as seasonally rising outputs in Southeast Asia.

In the meantime, world sunflower oil values declined on lingering subdued global import demand that coincided with the gradual resumption of shipments from Ukraine’s seaports. International quotations for rapeseed oil also dropped in August, due to prospects of ample supplies for the upcoming 2022/23 season. By contrast, world soyoil prices rebounded only moderately, mainly because of concerns over the impact of unfavorable weather conditions on soybean production in the United States of America.

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.

Soybeans Futures Highlights

  • November and January futures each closed 5.5 cents lower, to $14.46 and $14.5250, respectively.
  • November was a 77c discount to Sep last week and is now 55 1/4 cents under where Sep rolled off the board ($15.03)
  • Soybean basis bids fell 10 to 30 cents lower at three Midwestern processors and dropped 17 cents at an Ohio elevator while holding steady elsewhere across the central U.S. on Friday.
  • Preliminary volume estimates were for 132,332 contracts, shifting moderately below Thursday’s final count of 161,068.

Soybeans Technical Outlook

Soybeans spat the 50 wma, the move had swung with grains on the on and off US rail strike. From there continued lower after it held a retest of the triple bottom after prices were rejected harshly at the tenkan, off the Kijun and under the 50 wma finding support at 6/8. 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

September USDA WASDE Soybean report

  • USDA says farmers will harvest 4.38 bb of soybeans in 2022 with a national average yield of 50.5 bpa.
  • Revision is 153 mb less than last month’s forecast and reflects a 1.4 bpa cut to yield and half-million-acre revision in planted acreage.
  • Toward the low end of pre-report expectations.
  • USDA lowered ending stocks for 2022-23 to 200 mb. That’s 45 mb lower than last month and the lowest level in seven years.
  • USDA lowered planted acreage to 87.5 million and harvested acreage to 86.6 ma.
  • USDA increased beginning stocks by 15 mb to 240 mb, putting supplies at 4.633 bb.

USDA Domestic Soybean Crush

USDA reported that the domestic soybean crush in July totaled 181 million bushels, up from 174 million bushels in June and 166 million bushels a year ago. Refined soyoil production reached 1.68 billion pounds in July, which was a 2% increase from June.

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. 

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.

Brazilian soybean exports in August reached 226.3 million bushels, versus year-ago results of 238.1 million bushels. CONAB sees Brazilian soybean output as 125.55 MMT for 21/22, which was up slightly from their August figure. 

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

China has been buying Argentine beans after Argentina created a soy dollar exchange rate to encourage farmer sales.

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.

Ukraine

Ukraine’s sunflower and soybean harvests have begun. The country’s sunflower harvest is just 1% complete, with a total production of 81,700 metric tons so far. Ukraine is a significant player on the world sunflower oil export market.

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.

China Imports

USDA-FAS issued a report yesterday that showed China’s soybean imports are likely to fall due to waning demand from its swine and poultry sectors. The report expects China’s 2022/23 soybean imports to total 3.546 billion bushels. USDA’s Ag Attache reduced their forecast for Chinese soybean imports, with 21/22 needs lowered to 92 MMT and 22/23 reduced to 96.5 MMT. 

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 once again plans to auction off 18.4 million bushels of its state imported soybean reserves on September 16. Similarly sized auctions have been routine throughout the year in an attempt to boost local supplies and tamp down high prices.

China has been buying Argentine beans after Argentina created a soy dollar exchange rate to encourage farmer sales.

Taiwan Imports

Private exporters announced to USDA the sale of 3.8 million bushels of soybeans for delivery to Taiwan during the 2022/23 marketing year, which began September 1.

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

  • The weekly Commitment of Traders report showed soybean spec traders were net buyers during the week that ended 9/13. That increased their net long 12,498 contracts (12.5%) to 112,127 contracts.
  • Commercial soybean hedgers increased their open interest 41,317 contracts (7%) during the week. That extended their net short by 6.8k contracts to 140,469. 
  • Meal specs as 87,714 contracts net long on 9/13, a 6,093 contract stronger net long via net new buying on top of short covering.
  • The funds were also closing BO shorts and adding BO longs through the week for an 11,288 contract stronger net long of 55,270 contracts – a 14-wk high. 

Commodity Round Up

Highlights

  • The Bloomberg Commodities Index declined 1.5% (up 17.7% y-t-d).
  • Spot Gold fell 2.4% to $1,675 (down 8.4%).
  • Silver rallied 3.9% to $19.59 (down 16.0%).
  • WTI crude declined $1.68 to $85.11 (up 13%).
  • Gasoline slipped 0.7% (up 8%),
  • Natural Gas dropped 2.9% to $7.76 (up 108%).
  • Copper declined 1.4% (down 21%).
  • Wheat dipped 1.0% (up 12%),
  • Corn declined 1.1% (up 14%).
  • Bitcoin sank $1,555, or 7.3%, this week to $19.750 (down 57%).

Source: USDA, Farm Progress

From The TradersCommunity Research Desk