As analysts continue to digest what the latest USDA reports could mean for prices in the coming months, one thing is certain: soybean stocks to use is record tight.
“I think it is the largest revision and one of the largest surprises ever, and the quarterly stocks number sets the market off for a lot of price adjusting to do looking out into 2021,” says Bill Biedermann of AgMarket.Net.
Biedermann says the report added fuel to the soybean price scenario, which is why he thinks there’s even more upside to soybean prices.
“Soybean stocks to use ratio is down to under 4%. That’s the lowest ever for this time of year, and it’s the second lowest on record,” says Biedermann. When you look back look at history, prices in those years traded at $16 and $18. So, why would we think that the markets would stop here.”
UDSA chief economist Seth Meyer says with historically tight stocks to use in crops like soybeans, the market is very sensitive to any adjustments on production right now.
“I think we’re also in a situation where we have the lowest stocks and stocks to use since 2013-2014,” says Meyer. “We all just talked about where prices were at that time. So, I think on top of the changes in the last report, the market is quite sensitive to changes, too.”
Is the U.S. Running Out of Soybeans to Sell?
With tighter ending stocks and questions on not only when South American harvest will start, but how big of a crop that farmers there will have this year, there’s a major question surfacing: will the U.S. run out of soybeans to sell, or will higher prices ration demand?
“We won’t (run out of soybeans), because the market will know how hard it is to buy grain,” says Biedermann. “But whatever it is – corn or beans – it’ll eventually get to a price where it does force demand to find something else to do.”
Biedermann says he understands why USDA didn’t make huge adjustments to South America, despite dryness and other factors impacting the crop there; however, he doesn’t think USDA’s supply and demand tables today accurately reflect what carryover will be.
“Those adjustments are based on the idea we will ration, and as USDA said, if you take the current pace that we’re going, we’re not we’re not rationing yet,” says Biedermann. “So, if I were to take our current pace of all these demand factors, there wouldn’t really be much carryover. Prices have to go higher to get the industries to cut back.”
Arlan Suderman of StoneX says he agreed with USDA’s decision to not make major revisions to the South American soybean crop just yet. He says based on factors up until this point, StoneX’s estimate for South America is close to USDA’s most recent adjustment. However, he says even with a good crop in South America, there’s not a lot of cushion in supplies.
“I think the key question going forward still in the market is, have we sold more soybeans than what domestic processors can afford to give up? If you look at the shipment pace to date of soybeans, soybean shipped to date exceeds a seasonal pace needed to hit the USDA target by 350 million bushels. And that’s been maintaining a strong or even growing surplus. So, how much will that slow down in the last half of the marketing year? It’s a lot more than normal, which means we’re going to have to have a good-sized crop in South America or Brazil or we’ll run out, and buyers will be coming back looking for more before we get to the next harvest.”
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