Soybean Futures Spat July Lows with Support from Soymeal and Soyoil

Soybean futures along with canola were the strongest grains in the past week. Soybean prices closed higher Friday with support from soymeal (+1.0%) and soyoil (+1.5%). Uncertainty about soybean purchases by China, the world’s largest buyer of soybeans continues to keep prices in check. China continues to sell part of its state imported soybean reserves and has been routinely selling throughout the year to keep local supplies boosted and cool high prices. Weather patterns in Brazil and Argentina will be critical over the coming weeks for their soybean crops.

On Thursday, commodity funds were net buyers of corn (+4,500), soybeans (+6,500), soymeal (+4,500) and CBOT wheat (+2,500) contracts but were net sellers of soyoil (-1,000).

Soybeans

Soybeans Futures Highlights

  • Soybean futures closed Friday 3 1/4 to 4 cents higher with November options having expired.
  • Nov soybeans closed 1 3/4 cents higherfon the week
  • Soymeal futures were $1.60 to $4.60 higher with Dec meal $6.80 higher on the week
  • Soybean oil futures extended the rally by another 88 to 108 points in the front months on Friday, which left Dec oil up by 534 points wk/wk and back to June levels. 
  • USDA reported the week’s average B100 price in MN as $6.68/gal, up 3 cents through the week. 
  • Preliminary volume estimates were for 185,249 contracts, trending moderately below Thursday’s final count of 222,577.

Soybeans Technical Outlook

Soybeans rejected new lows at the bottom of trendline to close higher on the week. The 50 wma and the tenkan are both under the Kijun providing heavy resistance. We sit near the January breakup. The weekly cloud and Murray mingle around the $13.9/bushel benchmark.

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

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.

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

Domestic soy crush spreads on the board were lower to a 2-wk low. The CME Synthetic Soy Crush for Dec contracts was just $2.05/bu at midday.

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.

Soybean Stocks

NASS data showed September soybean stocks were 274 mbu carried into the 22/23 season. That compares to the average trade guess of 242 and last season’s 256.979 mbu. 2021/22’s final quarter usage was implied at 698 mbu, compared to the 512 mbu finish to last year. USDA revised the 21/22 production number to 4.465 bbu, which was up by 30 mbu from their prior figure.

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.

Weather patterns in Brazil and Argentina will be critical over the coming weeks for the top U.S. soybean competitors. While some areas have received a healthy soaking of rainfall this week, other areas have remained dry and may continue to see drought conditions as long as La Niña conditions remain in place. 

Brazilian soybean exports in August reached 226.3 million bushels, versus year-ago results of 238.1 million bushels. Brazil’s CONAB expects 22/23 soybean production to increase 21% on higher area and improved yields compared to last year, to 152 MMT. Going into the monthly WASDE data, the trade average guess is to see 152 MMT for Brazil’s 22/23 soy crop. 

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

Soybean export inspections amounted to 19 million bushels last week, compared to 10 million bushels a year ago, when the Gulf was recovering from a hurricane. Exports this year should maintain a sizable lead on last year through the first half of the year. Argentina has been a large old crop soybean seller in recent weeks, and another South American drought is needed for 2022-2023 exports to exceed last year.

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 last week 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 will once again sell another 18.4 million bushels of its state imported soybean reserves in an auction that will be held on September 30. The country has routinely offered similar sales throughout the year to keep local supplies boosted and cool 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.

South Korea Imports

South Korea purchased 60,000 metric tons of soymeal, likely sourced from South America, in an international tender that closed earlier today. The grain is for arrival around February 20.

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 managed money funds changed little through the week that ended 10/18. With 874 closed shorts and 250 new longs, the group’s net position was up to 66,862 contracts long.
  • Commercial soybean hedgers reduced exposure with 29,309 fewer open contracts. That weakened the net short by 5k contracts to 90,790.
  • In soymeal, spec traders were adding slightly more longs than short for a 408 contract stronger net long on 2.5k new contracts and a 10/18 net long of 70,797 contracts.
  • The funds were net new buyers of soy oil through the week, extending their net long by 14k contacts to 75k. 

Commodity Round Up

Highlights

  • The Bloomberg Commodities Index fell 2.1% (up 12.2% y-t-d).
  • Spot Gold rallied 0.8% to $1,658 (down 9.4%).
  • Silver surged 6.3% to $19.42 (down 16.7%).
  • WTI crude slipped 56 cents to $88.05 (up 13%).
  • Gasoline added 1.2% (up 20%),
  • Natural Gas sank 23.2% to $4.96 (up 33%).
  • Copper gained 1.5% (down 22%).
  • Wheat declined 1.0% (up 10%),
  • Corn slipped 0.8% (up 15%).
  • Bitcoin was little changed this week at $19,200 (down 59%).

Source: USDA, Farm Progress

From The TradersCommunity Research Desk