Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
Soybean Stocks to Bolster Markets
Tight old crop soybean carryout is likely to bolster the commodity markets in coming weeks, possibly through the summer. Consensus is building concerning the level of tightness in soybean stocks. In their April supply and demand estimates USDA projected old crop soybean stocks for the end of the ’08/’09 marketing year at 165 million bushels. Since the release of the report, market participants are beginning to speculate that this number could be lowered in the months ahead. The reasons given for this scenario developing are: tight old crop carryout forecasts, strong export demand, shrinking Argentine production prospects and stronger world edible oil demand. New crop soybean futures are a different story. New crop soybean futures will be buoyed by the need for a strong increase in 2009 production to offset tight supplies carrying over from the ’08/’09 marketing year.
This all adds up to the need to keep a watch on export movement. Thus far this marketing year, U.S. soybean exports are projected at a record pace. This week, for example, the weekly export sales report showed export sales of 29.7 million bushels. Once again, this was above that needed (only 6 MB) to meet USDA’s projection of 1.21 billion bushels for the year. Shipments were also above that needed to stay on pace with USDA projections.
Non-commercial speculative traders are re-entering the soybean market on the belief that tight old crop soybean supplies can only get tighter. Since early March the net-long futures position of these traders has built from about 8,000 contracts to nearly 66,000 contracts. Nearly one third of those contracts were added last week. May soybean futures surged through the $10.50 mark in this morning’s trade.
Weekly Corn Exports
Export sales of corn for the week ending April 9, were reported at 34.6 million bushels, well above the 17.2 MB needed this week to meet USDA’s projection for the year. Shipments were reported to be below that needed to stay on pace. Interesting to note, U.S. corn stocks are projected at 1.7 billion bushels, a somewhat burdensome level depending upon what happens to the demand structure of the corn market e.g., whether EPA approves a higher ethanol blend in gasoline or not. U.S. corn exports are also projected at a dismal 1.7 billion bushels for the ’08/’09 marketing year. New crop corn futures are currently trading at $4.13 per bushel, about 20 cents per bushel off of the recent high set on April 2 at $4.33 per bushel.
Weekly Wheat Exports
The weekly report showed export sales of 4.5 MB, below the 5 MB needed to stay on pace with USDA’s paltry projection of 980 MB. Shipments were also reported to be below that needed to keep pace with projections. Currently SRW wheat new crop futures are trading at $5.26 per bushel, about 43 cents off of recent highs.
Marketing Strategy
The old crop soybean market is likely to move higher in the near term presenting opportunities to pull sales triggers as we move into the summer months. To some extent, tight old crop soybean supplies will help to support new crop corn, soybean, and wheat prices for a limited time. Any rallies that occur as a result of this support or from outside sources (dollar value weakening, Dow increasing, crude oil prices increasing) should be used to consider new crop sales. For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.