Soybean Negatives Outweigh The Positives
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Early soybean harvest has begun in the western Corn Belt, where dry/hot conditions have sped the crop to maturity. In the eastern Belt, the crop is not quite as far along, and prospects may be improved by the cooler weather trend, as the soybean plant will not shut down as soon in a cooler environment. So far, an early harvest yield trend has not yet been established.
Ending Stocks
Earlier this summer, many analysts were comparing this year to the drought-plagued year of 2012. Let’s compare the two years now.
Ending stocks in the 2012 August supply and demand report were 115 million bushels, and the September report that year left them unchanged. By the January update, the estimate had increased to 135 million. Soybean prices peaked in mid-July 2012 and had a final peak in early September 2012 before pulling back sharply into November. This year, peak prices occurred in late July with another secondary peak last week, a very similar timeframe to the final peak in early September 2012. It is possible that if there is no bullish yield surprise next week, prices will have significant risk to the downside.
As can be seen on the accompanying graph, this year’s ending stocks are close to where they were last year at this time. According to the Reuters survey, the average trade expectation for US 2023/24 soybean yield in Tuesday’s report is 50.2 bushels per acre versus 50.9 in the August report. US ending stocks are expected to come in around 207 million bushels, down from 245 million last month.
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Crop Conditions
US soybean crop conditions through early July were tracking very close to 2012, but since then they have held steady or improved, while in 2012 they stayed poor into late August before leveling off and finally improving somewhat in September. The late-season improvement in 2012 was what boosted ending stocks from the September supply and demand report into January. This year we had a very hot and dry end to the growing season, which makes yield assumptions less predictable. Traders will be keenly anticipating early harvest reports.
Current crop conditions are well below last year in Illinois, Iowa, Minnesota, the Dakotas, and Missouri. Last year’s final soybean yield was 49.5 bushels per acre. With conditions lower this year, one could argue that 2023/24 yields will be lower than last year as well. If USDA yields come in above 50.0 bushels per acre, one must wonder if they have lost their historic correlation to crop conditions. Once harvest begins, we will find out whether pod-abortion and small bean size are significant issues this year.
Transportation Issues
River transportation is a major concern as the harvest begins. Barge freight rates this week were 85% higher than the five-year average, and low water restrictions on the Mississippi River will continue, as no soaking rains are in the forecast. Additionally, low water restrictions on the Panama Canal are expected to continue for the next 10 months, according to the Panama Canal Authority. This affects US grain shipments to Asia.
November Soybeans have key first support at 1353 and critical support at 1334. Long term support rests at 1300.