Fundamentally Speaking

Joel Karlin
DTN Contributing Analyst

With soybean meal futures making new contract highs and soybean futures at the loftiest levels since mid-September, one can only imagine where prices would be if South America were not about to start harvesting a record crop.

Despite these lofty values, demand remains robust with the current pace of U.S. exports 1.587 billion bushels vs. the February 10 USDA final year projection at 1.510 billion bushels.

This means that without one additional bushel of soybeans sold if all sales on the books ship, U.S. ending soybean stocks would fall to a measly 73 million bushels and yield a stocks to use ratio of 2.2%, by far the tightest ever assuming that the processing and residual demand figures are not changed.

The USDA and the market have been assuming that some of the 1.029 billion bushels worth of U.S. beans that China singlehandedly has purchased will be cancelled though so far that has not happened.

The accompanying chart shows U.S. soybean sales as of the first week in February as a percent of the Feb WASDE export projection and the change from that export projection to what final exports turn out to be in million bushels.

Since 1986, final U.S. soybean exports tend to be higher than the February WASDE projection and even when they are revised lower, the largest downward adjustment has been around 86-89 million bushels.

Both of those years had a lower percent of soybean sales on the books relative to the February WASDE estimate than this year where actual sales are 105%.

Quite simply the market is fearful of running out of soybeans unless export demand not only is pared back but sales on the books are canceled.

The USDA may be forced to print some negative residual figures just to make the balance sheet work especially with record high crush margins unlikely to lead to a throttling back of the processing rate.

(KA)

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