Rising export demand for U.S. soybeans continues in February

Global demand for food and energy continues. The soybeans raised in the Upper Midwest are good quality, have good color and keep well for hauling across the oceans.

The world has noticed, and on Feb. 3, the USDA officially announced that China had purchased 3.075 million metric tons (112.9 million bushels) of 2011 soybeans during the last week of January.

Sales of 1.032 million metric tons (37.9 million bushels) were also noted for the 2010 marketing year, with primary destinations to China, an unknown country, Japan and the Netherlands.

“I would like to talk about this bullish market in terms of just corn and soybeans and wheat, and just put on those narrow glasses, but we have to look worldwide,” said Ed Usset, University of Minnesota Extension grain marketing economist.

The fundamentals are very tight for soybeans, he said.

The 2010/11 soybean carryout is 140 million bushels, or 4.2 percent of projected consumption.

Usset’s colleague, Darrel Good at the University of Illinois, has pointed out that the 4.2 percent carryout is slightly smaller than the previous low of 4.4 percent in 2003/04.

“The low level of inventories projected for this year reflect different market conditions than those that existed in either 1995-96 or 2003-04,” said Good. “Both of those (marketing) years were characterized by small crops that required a sharp reduction in the level of consumption just to maintain minimum year ending stocks. Soybean consumption declined by 9.5 percent in 2003-04.

“In contrast, soybean consumption (this year) is expected to be about equal to last year’s record.”

The soybean exports don’t give up.

“Prices go up, and usually that cuts into the thing,” Usset said. “The only thing I see paired back at this point is feed demand. The dairy industry, hogs and cattle – these are not high times for these people. Feed demand is sliding back.”

Futures and cash prices for pork, beef, lamb and dairy were all rising in late January because of increased demand with limited supplies.

On the CME Group exchange, on Feb. 3, soybean futures traded with March at $14.43, May at $14.53 1/2, July at $14.60 1/2, August at $14.33 1/2, September at $13.99 and November 2011 at $13.70 1/2 per bushel. Compared with prices on Jan. 21, March was 31 cents higher, May was 30 1/2 cents higher, July and August were both 30 1/2 cents higher, September was 28 cents higher, and November was 23 ½ cents higher.

A production shortfall is expected in Argentina, although soybean production out of Brazil is expected to be strong. To maintain pipeline supplies for 2011, U.S. soybean harvested acres need to reach 77.5 million acres, or 78.5 million planted acres. To rebuild soybean stocks, planted acreage may need to reach 79.5 million acres, although some of that need could be met through double cropping winter wheat and soybeans.

At one elevator in western Minnesota followed in this column, cash soybeans on Feb. 3 were $13.66 per bushel and the basis was minus 78 cents. The basis had tightened by 5 cents from Jan. 21, and the price was 42 cents higher.

“This is an energy and global market right now,” said Usset. “That’s just the way it is. The oil market is driving this. People ask me what’s going to happen, and I say to go talk to an oil analyst. They might have more to say.”

According to Chris Hurt, Extension economist at Purdue University, cattlemen seem discouraged due to the high and volatile feed prices, shortages of pasture, and dry conditions in the southeastern United States, as well as in the central and southern plains.

Beef cow numbers are down 2 percent from Jan. 1, 2010, and down 6 percent from the same date in 2005.

“The only area of increase was the northern and central plains as cow numbers continue to concentrate somewhat more in the center of the country,” Hurt said. “Producers are planning to reduce numbers even further.”

The economist added that cattlemen will not increase beef production unless raising and feeding out beef becomes profitable, and more abundant forage and feed supplies become available.

“It is possible that corn and soybean meal supplies could increase with large 2011 crop production,” he said. “Unfortunately, given the limited number of acres available, trend yields may do little to increase inventories keeping the 2011/12 marketing year prices high and volatile.”

Hurt suggests that weather in 2011 and 2012 – and large soybean and corn crops – are needed for the beef industry to shift from liquidation to expansion.

“Favorable weather that provides above-trend corn, soybean and wheat crops, along with abundant forages, could shift the industry into expansion by 2012,” he said. “Much lower feed prices would provide strong financial incentives to expand brood cow numbers.”

(Source: http://www.farmandranchguide.com/news/markets/rising-export-demand-for-u-s-soybeans-continues-in-february/article_ab0e3cb6-3974-11e0-b8c5-001cc4c03286.html)