USDA charts down-then-up course for soybean prices

(AgriMoney) – Soybean prices look placed for an autumn lull before a run up to a “peak” next year, after a run on new-crop supplies depletes inventories, US Department of Agriculture officials said.

The USDA said that soybean prices could fall to a “seasonal price low” in the autumn, “provided that foreign crops do not run into major trouble”.

Many analysts have flagged the pressure on prices from the current harvest, expected to remain in full swing until late October, but also the growing concerns of dryness in Brazil as growers start sowing their main soybean crop.

And even immediately after harvest, “prices will be moderated by the portion of the crop that was sold forward last spring, when values were much lower than they are now, near $17 per bushel”, the USDA report said.

‘Price averages will strengthen’

However, prices look set to recover when this coverage from forward sales runs low.

“Monthly price averages will strengthen once farm deliveries are predominantly cash sales,” the briefing said, adding that “the price peak will come when there are fewer supplies available for sale”.

The USDA foresaw a “sharp reduction in stocks” by March 2013, when the “escalating cost of soybeans and weakening support for soymeal values could make [soybean] crushing margins quite low”.

Tightness in the soymeal market will be relieved by cuts to hog and poultry herds.

Export sales will also “undoubtedly” slow from a strong start to 2012-13 “once the sharp price increases are fully realised”.

Number doubts

The comments came as the USDA expanded on reasoning behind oilseed crop estimate revisions on Wednesday, when it cut its forecast for the domestic soybean crop by 58m bushels to 2.63m bushels, a bigger downgrade than investors had expected.

“Despite crop improvement for the Mississippi Delta and south east regions this year, a calamitous drought in the west Corn Belt continues unabated,” the USDA said.

However, the briefing failed to shed light on doubts over the department’s methodology in its latest revisions, which have led some brokers to believe that even the downgraded US soybean forecast may be an overestimate.

While the USDA’s harvest forecast factored in lower pod count, it used average pod weights, traders said.

‘Lot of concern’

Darrell Holaday at broker Country Futures said that there was “still a lot of concern about soybean yield as there is more talk about USDA using a pod weight in yesterday’s number that is actually above the seven-year average.

“That just seems unlikely given the overall condition of the crop.”

Benson Quinn Commodities said that the methodology “is leading many to believe bean yield and production will decline further on lower pod weights” in the October Wasde report.