Soybean Prices Take a Breather on Softer Chinese Export Demand

Soybean prices pulled back Friday after reports showed Chinese export demand was softer. Soybean export shipments were down 36% from the prior four-week average, with 14.9 million bushels.  The highs have been fueled by unseasonal buying on Brazil’s drought shortfalls earlier this spring. Beans are churning in a channel from ebbs and flows on general optimism over current supply and demand fundamentals.

Soybeans

Soybeans Futures Highlights

  • U.S. soybean futures closed Friday $0.10-$0.30/bushel lower.
  • Cash soybean prices largely unchanged at processors and river terminals Friday. Basis weakened at elevators across the Heartland as buyers continue to roll cash bids into the August 2022 futures contract.
  • Cash soymeal prices rose at rail market locations Friday, boosted by plant shutdowns for scheduled maintenance. Merchandisers reported demand patterns to be routine while USDA’s weekly export report Friday morning pointed to a 3% weekly rise in soymeal export volumes.

Soybeans Technical Outlook

Soybeans continues in a bull pennant framed by +4/8 and +1/8. Support +1/8 held again to rally just over the Tenkan as it remains in the pennant. Futures continue to pivot the $16 and $17/bushel benchmarks. Futures spat the Weekly +4/8 over $17.50/bushel twice. The flattening Kijun the magnet just under the 8/8. The weekly cloud and 50wma mingle around the $14.6/bushel benchmark.

Soybeans Weekly Chart via KnovaWave

China

China is planning to auction off another 18.4 million bushels of its state soybean reserves next Friday in an attempt to tamp 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

The latest USDA export sales report, covering the week through May 26 shows soybean export shipments were down 36% from the prior four-week average, with 14.9 million bushels. Egypt, China, the Netherlands, Japan and Mexico were the top five destinations.

Old crop soybean sales fell to a marketing-year low of 4.3 million bushels last week. New crop sales added another 10.4 million bushels, bringing the total to 14.7 million bushels. That was toward the lower end of expectations, which ranged between 7.3 million and 39.4 million bushels. Cumulative totals for the 2021/22 marketing year are still nearly 300 million bushels behind last year’s pace, with 1.825 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 was unchanged (up 34.9% y-t-d).
  • Spot Gold was little changed at $1,851 (up 1.2%).
  • Silver declined 0.8% to $21.93 (down 5.9%).
  • WTI crude jumped $3.80 to $118.87 (up 58%).
  • Gasoline surged 5.9% (up 91%),
  • Natural Gas declined 2.3% (up 129%).
  • Copper jumped 3.8% (unchanged).
  • Wheat dropped 10.2% (up 50%),
  • Corn fell 6.5% (up 23%).
  • Bitcoin gained $910, or 3.2%, this week to $29,680 (down 36%).

Source: USDA, Farm Progress

From The TradersCommunity Research Desk