Fundamentally Speaking

Lowest New Crop Soybean Sales in 5 Years

Joel Karlin
By  Joel Karlin , DTN Contributing Analyst

Despite ending stocks that are more than quadruple the year prior and a third year in a row of record South American production, soybean prices albeit down 36% from year ago levels are still trading at levels that appear elevated given levels of domestic and foreign stocks.

This situation may be changing as a confluence of factors has sent soybeans and soybean meal futures to new lows for the move as values are now trading at the lowest levels since last fall's harvest.

Some bearish factors include the realization that the South American soybean crop may be even larger than the last USDA estimates with great finishing weather.

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Meanwhile, the 3/31 prospective plantings report showed U.S. farmers intend to seed a record 84.6 million acres this year though many in the trade believe final plantings will be closer to 86 million.

Finally, sentiment that the best news on demand is behind us with crush margins starting to come down, winter weather that boosted feed use having passed and the window for U.S. exporting soybeans about closed.

Along these lines it appears that world vegetable oil and protein meal buyers are much more complacent going forward as advance bookings for U.S. soybeans are at their lowest levels in years.

The graphic below shows the USDA export projection for new crop soybeans given at their annual February Ag Outlook Forum, their first 'official" projection contained in the May WASDE report that is the first of 18 that are issued for each marketing year in million bushels and new crop sales as of the first week of April as a percent of that May WASDE export projection.

Since the USDA has not yet issued its first look at the new crop balance sheet we are using their Feb estimate as a close proxy and the chart shows the Feb Outlook Forum and the May WASDE estimate tend to track each other very well with the 15 year average differential a mere five million bushels.

Last week's export sales report showed the U.S. has sold 141.7 million bushels of soybeans for the new crop year starting September 1, the lowest since 71.6 million was sold the first week of April 2010 and this 141.7 million is a mere 7.8% of the new crop export projection, about half the 15% level seen over the past four years.

(KA)

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