USDA's estimated 222 million-bushel reduction in the 2003 U.S. soybean crop should push prices higher as we move into harvest, which is sure to encourage higher production of soybeans in South America.
USDA estimated U.S. soybean production at 2.64 billion bushels in its Sept. 11 report, down from last month's estimate of 2.862 billion bushels and last year's 2.73 billion bushels.
Meanwhile, corn production was estimated at 9.94 billion bushels, down from last month's 10.064 billion bushels and up from last year's 9.008 billion bushels.
U.S. ending stocks for soybeans were estimated at 135 million bushels, down from last month's estimate of 220 million bushels and down from last year's 145 million bushels. Corn ending stocks were estimated at 1.064 billion bushels, down from last month's estimate of 1.184 billion bushels and up from last year's 1.009 billion bushels. Wheat ending stocks were estimated at 640 million bushels, unchanged from last month and up from last year's 492 million bushels.
The developing situation with corn and beans reinforces the old adage that corn is a crop of July and soybeans are a crop of August. Noted Dan Basse, president of AgResource Co., “The hot, dry weather in August had a much larger impact on the soybeans than anybody anticipated.”
The bullish news could push November beans to $6.20 or $6.50 according to Basse. “But I don't think we'll gallop northward unless we have a significant weather problem in Brazil between December and January.”
Basse said the expected spike in soybean prices as we head into U.S. harvest, “should have Brazilian growers licking their chops, and probably planting more acres.”
The difference maker in the lower soybean estimate comes from Iowa, where USDA slashed forecast yields by 9 bushels an acre and Minnesota, down 5 bushels per acre.
According to Don Roose, U.S. Commodities Inc., end users of beans are not covered, which means the market will have to ration beans. “To reach a 135 million bushel carryover, the market had to cut exports 60 million bushels.”
Another thing to consider, according to Basse is that USDA has a historical tendency of finding beans in October and November when there is a sharp drop in September. “But the degree is yet to be seen.”
Analysts are also expecting that harvested acreage could drop 100,000 acres to 200,000 acres on soybeans and 400,000 to 500,000 acres on corn in subsequent reports.
“The bean market is going to be very sensitive over the next six months,” Basse said. “We're going to have tremendous trading opportunities. This market is going to volatile.”
While U.S. supplies of soybeans are tight, there is an ample world situation, he added. “That's why it would be difficult to push above $6.50 unless we have a South American weather problem. That's also why the U.S. share of world trade is declining to historically low levels.”
While U.S. corn production is lower according to USDA estimates, it's still on track to be the second largest corn crop on record. Some in the trade believe that USDA might have missed the corn number, however, so give the corn number room to contract further.