Limited supplies keep 2013 soybean prices high

(Farm and Ranch Guide) – The market gave a strong incentive to sell 2013 soybeans but little incentive to market 2014 soybeans.

Just like U.S. corn, demand for soybeans has been strong and yield in 2013 was a little lower than expected. That’s led to an inverted market where prices are better now than the futures prices.

The USDA’s World Agricultural Supply and Demand Estimates (WASDE) report for May 9 showed that the 2013 soybean carryout number dipped to 130 million bushels.

One year ago, the U.S. expected to have 265 million bushels at the end of the 2013 marketing year. The number now in place, close to 130 million bushels, recognizes the strong demand for U.S. soybeans.

“We were at 135 million bushels in the April report, so it’s down 5 million bushels,” said Peter Georgantones of Roy E. Abbott Futures, Minneapolis. He spoke at the MGEX Crop Report Conference Call on May 9.

“I would call that a pretty neutral number, but there were some people who were thinking we might find some beans from last year’s crop and had expected to modestly carry that number up. So 130 million bushels is a constructive number,” he added.

What makes the number even more interesting is the increase of soybean imports into the U.S. to 90 million bushels. The USDA had estimated only 15 million bushels of imported beans would enter the U.S. in their May 2013 report.

On May 9, the July future was $14.86, August was $14.22, September was $12.855, November was $12.26, January was $12.33, and March 2015 was $12.37 per bushel at the CME Group exchange.

Compared with prices back on April 25, July was 4 cents higher, August was 3 cents higher, September was 8.5 cents lower, November was 8 cents lower, January was 6 cents lower and March was 6 cents lower.

For 2014/15, the USDA has estimated the U.S. will harvest 80.5 million acres of soybeans (plant 81.5 million acres) and a 45.2-bushel per acre crop. If this estimate proves true, the U.S. will raise about 3.635 billion bushels of soybeans this year.

With imports of 15 million bushels, crushings of 1.715 billion bushels, and exports of 1.625 billion bushels, the ending stocks number is a sizeable 330-million bushels.

“That is the number that I think will eventually do in the soybean market here,” said Georgantones. “A 330-million bushel carryout implies we could probably fall from $12.25 November by $1.50 to $2 per bushel on the Board.

“We’re going to be buried in beans next fall, if we have a good crop this year.”

With a lot of acres slated for U.S. soybean production, plus a lot of soybean acres in South America and 2014 soybeans in storage, Georgantones says he is “very bearish November soybeans.”

“I feel they have a long way to go on the downside,” he said. “The problem is I am bullish on old crop – which is the July contract and things are still very tight on the old crop front and they are going to be for the next 60 days.

“It’s hard to have the back end break too heavily when the front end is rallying. That is why November soybeans have been holding in there – better than they should, frankly.”

At one elevator in western Minnesota followed in this column, cash soybeans on May 9 were $14.27 per bushel with a basis of 60 cents under.

The basis hasn’t been this narrow since February.

Compared with prices on April 25, the soybeans were 12 cents higher and the basis had narrowed by 10 cents.

In the USDA’s May WASDE report, the average 2013 farm price was $13.10 per bushel. For the 2014 crop, the average farm price was estimated at $9.75 to $11.75 per bushel.

Georgantones thinks that once the 2013 soybean crop has played itself out, traders will sell 2014 soybean futures contracts.

“We are going to have many, many soybeans – so there are no issues there,” he said.

While farmers may feel like they are behind in their planting progress, in the big scope of things, the plantings are going okay.

“The farmers will get their crop planted,” he said. “We’ve had enough open days to give these guys a real chance to get in there, and get the crop planted.”