Soybean Prices at Four Week Lows Dragged Down by Lower Palm Oil Prices

Soybean prices pulled back Tuesday to a four-week low. Soybeans are tracking lower palm oil prices as Indonesia is allowing more exports after they had capped them cap earlier in the year. Soybean prices saw a spillover weakness from corn and wheat spurred some technical selling today also. Soybeans at $16.67 USD/Bu are within striking distance from the record-high of $18 hit in 2012 underpinned by concerns hot weather in the US could damage yields. Another 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

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.

Soybeans Futures Highlights

  • U.S. Soybean July futures dropped 18.75 cents to $16.8325,
  • August futures down 22.5 cents to $15.9975.
  • Soybean basis bids were steady to mixed across the central U.S. on Monday, trending as much as 10 cents higher at an Iowa processor and falling as much as 10 cents lower at an Indiana processor today.
  • Preliminary volume estimates were for 202,056 contracts, trending moderately above Friday’s final count of 169,017.

Soybeans Technical Outlook

Soybeans broke out of the bull pennant framed by +4/8 and +1/8 but was unable to sustain the break closing right at the breakout. Support at the Tenkan is key as we see if this isa spit of a spit to move higher or a failure. The Futures pivot has moved to $17/bushel benchmarks. Futures spat the Weekly +4/8 over $17.50/bushel three times now. Any flattening Kijun will be a magnet just under the 8/8. The weekly cloud and 50wma mingle around the $14.6/bushel benchmark are massive.

Soybeans Weekly Chart via KnovaWave

China

China is planning to auction off another 18.4 million bushels of its state soybean reserves next Friday (June 17) in an attempt to tap down high prices and replenish local supplies. China has already concluded a flurry of similar auctions earlier this year.

In April, Chinese purchases of Brazilian soybeans jumped 120% above March’s tally, with 231.5 million bushels after some weather-delayed cargoes finally arrived. China also imported 60.3 million bushels of soybeans from the United States last month, roughly half of its U.S. deliveries in March.

Soybean Exports

Soybean export inspections were soft last week at 15.7 million bushels, sliding moderately below the prior weeks’ tally of 22.3 million bushels. It was also slightly on the low end of trade estimates, which ranged between 11.0 million and 23.0 mil-lion bushels.

Egypt, Mexico, China, Pakistan and Colombia were the top five destinations. Cumulative totals for the 2021/22 marketing year are still running significantly behind last year’s pace, reaching 1.870 billion bushels.

USDA’s outlook last week for soybeans saw lower beginning and ending stocks, plus higher prices. The agency raised its soybean export estimates by 30 million bushels to 2.17 billion, “reflecting strong export sales and a reduced export forecast for Brazil.” That meant 2022/23 ending stocks fell 30 million bushels to 280 million, versus an average trade guess of 307 million.

EU Imports

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.

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.

USDA-ERS Report

Last week 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.

Commodity Round Up

  • Bloomberg Commodities Index sank 6.4% (up 27.8% y-t-d).
  • Spot Gold declined 1.7% to $1,839 (up 0.6%).
  • Silver slipped 1.0% to $21.67 (down 7.0%).
  • WTI crude slumped $11.11 to $109.56 (up 46%).
  • Gasoline plunged 9.1% (up 70%)
  • Natural Gas sank 21.5% (up 86%).
  • Copper dropped 6.2% (down 10%).
  • Wheat dipped 2.2% (up 36%),
  • Corn added 1.5% (up 29%).
  • Bitcoin collapsed $8,520, or 29.6%, this week to $20,520 (down 56%).

Source: USDA, Farm Progress

From The TradersCommunity Research Desk