Global Supplies Weigh on Local Markets

MT. JULIET, Tenn. (DTN) -- Quentin Connealy sat 2.5 hours in line Tuesday to deliver soybeans at an ADM soybean processing facility in Fremont, Nebraska, about 40 miles from his farm along the Missouri River.

"Haven't been to this spot in five years," the farmer wrote on X, formerly known as Twitter. "Used to come here with Dad when I was little and put pennies on the railway for fun, then walk downtown and get us lunch. Hard to believe that was 30 years ago."

But the purpose behind the Jan. 30 long haul wasn't sentimental. He was delivering soybeans he'd contracted to sell to a container shipping company closer to home. The company would still pay the agreed-upon price -- about $1.30 per bushel more than the March soybean futures contract -- but didn't need the beans anymore.

"What's usually a 2.5-hour round trip to their facility a few miles away is turning into about 4.5- to 5-hour round-trip time at this facility. Not 'soy' much fun," he joked.

Connealy told DTN the company said it wouldn't ship any more containers and instead Brazilian soybeans would be going to its East Coast destinations.

Earlier this week, Agricensus reported three cargos of Brazilian soybeans were purchased by an East Coast crusher. It's more typical for eastern-seaboard importers to buy Brazilian soybeans in May when that country's harvest is nearing completion and U.S. supplies are depleted. January purchases are unusual.

"It's an interesting example of how the combination of weather factors in Brazil and demand factors in China are not only causing long truck waiting times in Fremont but also likely adding to the availability of supplies in the Midwest and weighing on local bids," DTN Lead Analyst Todd Hultman said. "The market has a lot of moving parts and this is an interesting one that traces back home."

After an initially dry start to the growing season, rains brought Brazilian soybean production potential back to life. USDA is now estimating a 157-million-metric-ton (mmt) crop, or about 5.77 billion bushels (bb). Argentina's also expected to produce 50 mmt, almost double last year's drought-damaged total.

Hultman said markets are acting like another big crop is coming, regardless of what forecasters say. (For more on that, please read last week's Todd's Take column here: https://www.dtnpf.com/… )

He said prices at Paranagua, Brazil's second-largest soybean export port, dropped from around $12.95 per bushel at Christmas to $11.30 on Jan. 30, which indicates traders think there will be a lot of beans to sell.

In Connealy's case, the cost of shipping soybeans from Brazil via boat is likely cheaper than the company's original plan to send soybeans by rail across the U.S., Hultman said, even considering the company must honor the original purchasing price.

The arbitrage opportunities make Hultman nervous about the imbalance of export sales to China and actual shipments. China has 160 million bushels (mb) of sales on the books that haven't left U.S. ports.

China's economy is also having problems with its GDP estimates and the stock market trading lower. Earlier this week, embattled real estate developer Evergrande was ordered to liquidate, adding more bearish sentiment to China's market.

"Seeing falling prices in China, seeing the concerns they're having with the economy and that Brazil's prices are already cheaper than U.S. prices -- putting that all together, we're definitely at risk for getting some cancellations from China, which would not be good news," Hultman said.

The increased pressure pushed the DTN National Soybean Index, an average of cash bids from elevators across the country, to the lowest level since December 2020. It closed at $11.42 per bushel on Jan. 29. By Wednesday, the NSI was $11.69

Hultman said soybeans routed away from export markets could find willing buyers in U.S. soybean crushers, who have expanded significantly over the past two years to serve growing renewable diesel production. USDA anticipates crush demand for the 2023-24 marketing year at 2.3 billion bushels, up more than 150 million bushels from the 2020-21 season.

Even in the most bearish years, the markets can find a way to surprise, Hultman said.

"And if there is good news, it's that the market prices have gotten so cheap down here that we should start to at least see more two-sided trade," he said. "For most of the year, it's been all downhill except for the drought scare. Now that we're finally getting to seriously and legitimately cheap prices, the market does deserve to give farmers more of a trading range."

Katie Dehlinger can be reached at katie.dehlinger@dtn.com

Or you can follow her on X, formerly known as Twitter, at @KatieD_DTN

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