This week’s USDA supply and demand report did not give traders any major surprises, but it did offer some clarity on how the late-season weather has affected soybeans. US 2023/24 soybean yield was pegged at 50.1 bushels per acre, down from 50.9 in the August report and right on expectations. Pod counts were up 9% from a year ago. Cuts to exports and crush and a 100,000 increase in harvested acres pushed the ending stocks forecast to 220 million bushels versus an average expectation of 207 million.
In the past, a 100-million-bushel ending stocks number was considered the minimum pipeline amount for soybeans, and the USDA rarely forecast a number below that level. Now, many analysts consider the minimum pipeline to be 200 million bushels and think USDA would rather massage demand numbers than release a report with a number below there.
The NOPA August crush came in at 161.453 million bushels, well below the average expectation of 167.802 million and the lowest in 11 months. August 31 soybean oil stocks came in below expectations, and they were the lowest in six years. Widespread maintenance downtime in August typically means August crush is one of the lowest of the year. Our opinion is that new crush capacity and strong demand will bring crush rates back to record levels as we move into fall and early winter. We would not be surprised if USDA reverses course and increases its crush forecasts in the next few supply/demand reports. Notably strong crude oil and diesel prices lately have supported soybean oil, and continued high energy prices could become a bullish force for that market.
The South American planting window is open in Mato Grosso and surrounding areas. Southern Brazil is seeing favorable planting conditions, while the center-west and northern regions have seen infrequent showers. Mississippi River logistics will remain a significant problem next week, but updated forecasts have added rain to the central Midwest a week from now, which may give river levels a boost.
This week, China raised its maximum moisture specifications for imported beans from Argentina and the US to 13% and for Brazilian beans to 14%. This is important because Brazilian beans generally carry a higher moisture content than US beans, and Brazil typically does not have drying capacity at the ports. Details have not yet emerged on how China will deal with cargoes that are above their maximum moisture levels. We will update further as more information surfaces.
Source: Bloomberg and CME
Originally Published September 15, 2023
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