Huge soybean crops in North America and South America could push world inventories higher and prices lower in 2010, according to a market analyst speaking at the CME Group press briefing on USDA’s Nov. 9 Crop Production Report and World Agricultural Supply and Demand Estimates.
Gavin Maguire, with EHedger, says longer term, soybean prices appear on solid ground. But with South America expected to produce as much as 30 million additional tons of soybeans in 2010, prices could take a dip or two next year.
“When you throw in a record size crop here in the United States, you have a lot of extra beans over the next six months. By the middle of next year, we will probably have the highest level of soybean inventory we’ve ever had globally. That’s a story we can’t ignore for too long.”
Longer term, Maguire sees soybean prices at or above $10. “The bias is generally higher for all commodities, but in 2010, we have some real potential to revisit lows we haven’t seen in quite some time. A dip below $8 soybeans cannot be ruled out.”
David Hightower with the Hightower Report says USDA’s November report on U.S. crops is more like a September or October report, in terms of its variability to final numbers. “More changes could be in the cards.”
But as interesting as this uncertainty is, “we’re not really dancing to fundamental tunes anymore,” Hightower said. “There are macro-level themes dominating several of our markets, including a strong correlation to the value of the U.S. dollar.
“We can pore over these numbers as much as we like, but it’s really the appetite of managed money that determines our direction. This makes things increasingly difficult for producers and consumers of commodities. But come next spring, corn producers are going to grow corn in abundance, and only a devastating decline in the corn price will change that.”
USDA forecasted U.S. corn production 97 million bushels lower than last month due to a 1.3-bushel-per-acre reduction in forecast yield. U.S. corn exports are projected 50 million bushels lower reflecting the slow pace of sales and shipments in recent weeks and prospects for increased competition.
U.S. corn ending stocks were projected 47 million bushels lower. Global corn beginning stocks for 2009-10 were lowered 900,000 tons mostly reflecting higher 2008-09 feed use for EU-27 and higher food, seed, and industrial use for South Africa. Global corn production for 2009-10 was lowered 2.8 million tons with reduced production for the United States, Brazil, EU-27, Russia, Venezuela, and Canada.
Average U.S. rice yield is estimated at 7,038 pounds per acre, down 77 pounds from last month. Harvested area is unchanged at 3.1 million acres. Long-grain rice production was lowered 1.7 million hundredweight to 152.5 million, while combined medium- and short-grain production was forecast 700,000 hundredweight lower to 65.7 million.
World rice production was forecast at 432.1 million tons, down 1.6 million from last month due mainly to decreases for Brazil, India, the Philippines, and the United States.
Soybean production was forecast at a record 3.319 billion bushels, up 69 million from last month. Soybean yield is projected at a record 43.3 bushels per acre, up 0.9 bushel from the previous estimate. Soybean exports were raised 20 million bushels to 1.325 billion.
Brazil soybean production was projected at a record 63 million tons, up 1 million from last month due to an expected increased harvested area. Argentina soybean production was raised 500,000 tons to 53 million tons due to increased area.
U.S. wheat supplies for 2009-10 were reduced 4 million bushels this month with small downward revisions to hard red spring wheat and durum production. Exports are projected 25 million bushels lower based on the slow pace of export sales. U.S. ending stocks for 2009-10 were projected 21 million bushels higher. Ending stocks would be a 10-year high at 885 million bushels.
Global wheat supplies for 2009-10 were projected 1.7 million tons higher. Global wheat trade for 2009-10 was projected higher this month. Global ending stocks were projected 1.5 million tons higher.