NAPERVILLE — Chicago-traded soybean futures are at their highest ever levels for mid-June despite the forecast for a record-large U.S. harvest this fall and a supply recovery into next year.
However, the degree of recovery is uncertain because stock estimates for the current year keep falling and the strong U.S. plantings required for a massive soybean crop are still unconfirmed.
In the first half of this month, CBOT soybeans traded nearly 12% above the same period in 2021. However, futures have come nearly $1 per bushel off last Thursday’s high of $17.84, which was just 5 cents below the contract’s all-time top set in September 2012.
One year ago, U.S. soybean ending stocks were seen at razor-thin levels and the new harvest was set to expand supplies only minimally into 2022. Predictions are roomier today, though information coming in two weeks could shake up that narrative.
Broad commodity selling and other wider market forces can override a tight soybean balance sheet, and that happened exactly a year ago, catching many market participants off guard.
Soybean futures fell by nearly $1.20 per bushel on June 17, 2021, the most ever for the front-month contract outside of delivery. Limit-down moves in CBOT soybean oil stemming from U.S. biofuel policy rumors were largely to blame as was general weakness across global commodities.
That soybean selloff was marked by a sizable reduction in outright long positions held by large speculators, though they were not confident enough to take the short side. The current setup is very similar, with speculative longs hovering at six-year highs for the date and short bets staying minimal.
Agriculture and energy prices are up substantially from a year ago, though signs of slowing economic activity are cropping up, and any acceleration of that slowdown could eventually add pressure to markets.
The U.S. Department of Agriculture confirmed on Wednesday the cancellation of 100,000 tonnes of U.S. soybeans set for export before Aug. 31.
Unshipped commitments have been larger than usual, and some market participants were becoming suspicious as to whether complete fulfillment could ever occur.
Although unhelpful for demand, the cancellation may be a symptom of tight U.S. cash markets, which have been lifting nearby soybean futures in recent weeks. That theme may be emphasized at the end of the month when the government’s stocks survey arrives.
Analysts are on a five-year streak of overestimating USDA’s June 1 U.S. soybean stocks, which would whittle this year’s ending supply if an equal throttling of demand is not observed.
The trade’s trend in acres also raises supply risks for the June 30 report. There has not been a bearish surprise on U.S. soybean acres in that report since 2014, so if analysts are up to their old ways, both the old- and new-crop soybean supply pictures could be clipped at the end of the month.
Analytics firm IHS Markit predicted on Wednesday U.S. soybean acres at 88.735 million, down from March intentions at 91 million.
That number should concern traders because if realized, next year’s supply outlook would reflect a reduction from this year, not a build as is currently expected.
Refinitiv Commodities Research had a less risky acreage forecast on Wednesday, pegging U.S. soy plantings at 90.1 million acres, still down from intentions.
USDA gave its first health assessment of the season on Monday for the U.S. soybean crop, rating 70% as good or excellent. That is close to average for the date and thus does not offer any bias on crop outcomes, as rainfall in August is the biggest factor for strong soybean yields.
USDA on Friday pegged 2022-23 U.S. soybean stocks-to-use at 6.1%, down from its initial estimate in May of 6.8% but up from the 4.6% projected for 2021-22, which ends Aug. 31. Stocks-to-use in 2020-21 hit a five-year low of 5.7%, though it was seen as low as 2.6% during that season.
The agency has trimmed the 2021-22 estimate in every month since January, when it was 8%. That largely owes to a record string of U.S. export sales earlier this year given the severe shortfall in top supplier Brazil’s crop. Karen Braun is a market analyst for Reuters. Views expressed above are her own. (Editing by Muralikumar Anantharaman)