Soybean Numbers in October WASDE are “Concerning”

The USDA’s National Ag Statistics Service released its Crop Production and World Agricultural Supply and Demand Estimate reports this week. Joe Vaclavik, President of Standard Grain in Tennessee, says it wasn’t a big surprise that U.S. corn and soybean crops grew.

“U.S. crops got a little bit bigger. I don’t necessarily know that that was a massive shock, but more of a surprise in soybeans than corn, but you’re talking about increases in both crops of less than a bushel per acre from last month, so I don’t necessarily know that it’s the biggest thing in the world. When you look at the world numbers, there is certainly some bearish stuff there. Your world soybean carryout projection jumped by more than four percent – I believe it’s a fairly significant jump for one month – along with lower demand for old crop, as well as bigger crops and big projections for South America. When you look at the soybean situation, it doesn’t look that good, and the situation is getting much more bearish. When you look to the United States, your ending stocks, or stocks-to-use ratio, are almost 2016 tech levels. It’s cause for concern, and we need to see more export demand for soybeans.”

He says there are a couple of main reasons that soybean exports have dropped by quite a bit; “One of the reasons we’re off, I think, 35 percent year over year in sales is because of the issues at the Gulf of Mexico. It’s absolutely hurt export business; beans that would have been shipped in this October-November window, that business went back to Brazil. The fact that we in the United States continue to have limited shipping capabilities, and this time, I think, hurt the fact that Brazil had a record crop last year and is in the process of planting what could be a record crop this year. Also not helpful is the fact that China has issues, including a lack of power at their crushing facilities and reduced demand. It’s just a number of factors.”

Vaclavik says the wheat numbers were more positive. “The wheat numbers were actually friendly. The U.S. numbers were friendly, in my view, certainly versus last month. The global numbers were friendly versus last month and relative to expectations, you got a story in wheat, but I would argue that we’re fairly priced here with winter wheat in the $7-$7.50 neighborhood. I don’t think we’re overpriced, but I don’t think we’re necessarily underpriced either. The wheat situation is friendly and going friendlier, whereas the row crops seem to be getting a little bit looser.

Overall demand for corn makes that market less concerning than soybeans.

“I think your demand base is still good and could improve. We’ve got a record number of export sales in corn, whereas, in beans, we are 35 percent behind last year. And corn ethanol production is going to ramp up because interior corn basis has fallen apart, and the board got cheaper, so ethanol production margins have improved drastically. You’re going to see that portion of corn demand really improve. The export sales are good, ethanol production is good, food demands off a little bit, we know that, but those two portions, your demand-based exports, and ethanol, I think, are good and potentially improving.”