Even record forecast soybean acreage will not significantly pressure soybean prices in the next few months because there's so much bullishness underlying the market, a grains analyst says.
Soybean acreage — forecast at 75.4 million acres in USDA's March 31 Planting Intentions Report — could produce a crop of close to 3 billion bushels, according to Dan Basse, president of AgResource, Co., who spoke during a Chicago Board of Trade press briefing.
“If there's a whipping boy in the markets, it will be beans that see the most selling pressure,” said Basse. “But I don't see the market getting much below $7.20 to $7.40 until we have a new crop confirmed and made through the weather.”
Basse noted that current soybean stocks were estimated at 906 million bushels (on March 31). “That's up from what traders were expecting, but still the second smallest stocks figure since 1977.”
But Basse advises market-watchers not to get too caught up in whether or not the stocks number is bullish or bearish. “We still need to ration about 250 million bushels over the last half of the crop year. The market may be weaker, but we're not heading into a bearish trend.”
A more important question to focus on, according to Basse, is, “Will the South Americans produce the world's bean crop and will the United States produce the world's corn crop? The answer is yes and the market at some point is going to have to encourage that.”
Meanwhile, global feed grain shortages this year and next are expected to drive the grain markets, he says.
Basse noted that U.S. corn acreage at 79 million acres “is not nearly enough to satisfy the demand profile for the upcoming year. There is going to be this fight going on between the corn market and new crop beans as we try to shift acres back and forth.”
Basse said a 79 million-acre corn crop would produce about 10.2 billion bushels. “With usage at 10.5 billion bushels, it tells me that December corn is undervalued and needs to move higher to secure some acres from beans.
“We're going to need very good weather and longer term, if we see China becoming an importer by the latter part of this year, the United States is going to have to continue to price corn very competitively relative to soybeans.
“Grain and oilseed markets will continue to do better as we move into spring,” Basse said. “I still see a tremendous amount of rationing to be accomplished in old crop beans.
“Our sensitivity to weather and volatility in price is going to remain very high. I see no reason to change longer term bullish opinion. We're going to have to have big crops come June and July before we will see a sustained bearish price presence.”