- Last marketing year, all the talk was of slow US corn exports, demand heavily influenced by a lack of available supplies in the United States.
- A similar situation seems to be brewing in the US soybean market this marketing year, with total sales running more than 20% behind last year's pace.
- Deferred soybean futures spreads are indicating the commercial side of the market is growing more concerned about global supply and demand, though much will depend on Brazilian weather.
My previous piece for Barchart sparked a good discussion on export demand for US soybeans. After I showed 2023-2024 total sales (total shipments plus unshipped sales) were running 26% behind the same week the previous year, as of Tuesday, November 2, the question came in about a comparison to the previous 5-year average. This raised a valid point; one I’ve talked about before regarding 2022-2023 US corn export demand: You can’t make sales of what doesn’t exist. I think there is a law about that sort of thing somewhere. I do recall an old market saying that goes, “He who sells what isn’t his’n, pays the price and goes to prison”. This year, the short US crop looks to be soybeans.
I don’t have all the data to go back 5 years, but I can go back four. Here’s what I found regarding total sales of US soybeans as of roughly November 9:
- 2023: 1.035 billion bushels (bb)
- 2022: 1.322 bb
- 2021: 1.272 bb
- 2020: 1.884 bb
- 2019: 867 mb
- Previous 4-year Average: 1.336 bb
As my friend suggested, 2023-2024 US total soybean sales are not just lower than last year at this time, but the previous almost five years. The outlier was 2019, the first full marketing year to feel the effects of the Twitter-driven trade war (yes, it was still called Twitter back then) between the US and China. I’ve pointed out a number of times how January 2018 was the tipping point when it comes to the US as a major player in the global soybean market, with the 2016-2017 marketing year being the last time the US and Brazil were near equals when it came to estimated exports. The final WASDE numbers had the US at 58.96 mmt versus Brazil’s 63.14 mmt, the US 7% behind. Fast forward to the November 2023 WASDE numbers and the US is projected to ship 51% less soybeans than Brazil. All while China’s imports have grown from 93.5 mmt to an estimated 100.85 mmt at the end of 2022-2023.
But along with the politics we have to remember the soybean market, like the rest of the Grains and Softs sectors, are a weather derivative. Much of what happens in the global market, including imports and exports, is dependent on weather. In the case of the US, 2023 production has been projected at 112.39 mmt (4.129 bb), the smallest US crop since 2019’s 3.552 bb production. Looking ahead at 2024, according to the November WASDE report, Brazil’s crop was still projected to be a new record of 163.00 mmt. But we have to attach an asterisk to this as much of the chatter is of how continued hot and dry weather has made the 163.00 mmt unlikely, with the question now being if 2024 production will outdo 2023’s estimate 158.00 mmt production estimate.
As I talked about last time, the soybean futures market is showing concern from commercial traders for the combined 2023 US and 2024 Brazilian crops. Wednesday’s close showed the March-May soybean futures spread at a carry of 11.25 cents and covering 33% calculated full commercial carry, while the May-July finished at a carry of 2.75 cents and covered 8% cfcc. If/when the further deferred spread goes inverted, the market will get much more interesting as it would indicate a sharp tightening of global supply and demand.
The end of October saw the cash index of the soybean market (ZSPAUS.CM) calculated at $12.38. Based on my analysis of the cash price correlating to available stocks-to-use (as opposed to USDA’s imaginary ending stocks-to-use), the month end as/u figure was 7.9%. This was down from the end of September 8.5%, a number heavily influenced by the early stages of the US harvest (more supplies were made available). Now that we are halfway through November the cash index has jumped to $13.30, cutting as/u to 6.2%. A look at the scatter chart shows this to still be in the upper range of marketing year final as/u figures, particularly 2022-2023 at 5.9%.
I’ll say it again: Is the US soybean market fundamentally bearish? No, but neither is it bullish. At least not yet. I still think there is a good chance export demand increases the second half of the 2023-2024 marketing year, as opposed to the normal first half loaded export demand. The problem could still be available supplies. If US stocks continue to tighten it could skew 2023-2024 exports much like what we saw last marketing year with corn.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
