The US domestic soybean crush continues to run at exceptionally strong levels, and in some cases it is actually improving due to firmer cash meal basis levels and steady demand. The September to March crush is up 6.7% from the same period a year ago, compared with the USDA’s estimate for crush to be down 3.9% year-over-year. Many feel that at this point in the crop year the demand transition from US-origin soybeans to Argentina-origin soybeans should already have taken place. However, due to slow farmer sales and aggressive demand from world importers, this transition has not yet happened. Argentine farmers continue to hold onto their soybeans due to rising domestic inflation levels, as they see their crop essentially as a currency. The market remains fearful that supply pipelines will contract during the June and July period, at which point the US will not be able to step in to supply the market. The Rosario Grains Exchange estimates that farmers have sold 26% of the 2012/13 crop as of April 10th, compared with 46% for the same period last year.
There is historical data that suggests the July/November spread may have significant upside potential:
- 1972/73 Crop Year – Stocks to use ratio was 4.6%, and the high for the spread was +5.32 on June 4, 1973.
- 2003/04 Crop Year – Stocks to use ratio was 4.5%, and the high for the spread was +3.27 1/2 on July 6, 2004.
- 2008/09 Crop Year – Stocks to use ratio was 4.5%, and the high for the spread was +2.45 1/4 on June 30, 2009.
- 2012/13 Crop Year – Stocks to use ratio is 4.1% as of the April USDA Supply and Demand report.