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Soybeans Hit 'Limit Up' On USDA Data

Tighter soybean ending stocks

The latest USDA data from the May Crop Production and WASDE reports is seen as bullish for the soybean and corn markets.

Join the coversation about today's reports in Marketing Talk.

In its report, USDA dropped the U.S. 2015-16 soybean ending stocks to 400 million bushels, compared with average trade expectation of 426 million. It is providing the impetus for a sharp soybean rally.

At the close, the July corn futures settled 12 cents higher at $3.81, Dec. futures finished 10 3/4 cents higher at $3.87 3/4 per bushel.

July soybean futures settled 57 1/2 cents higher at $10.84, hitting its 65¢ daily limit at one point in the session, while Nov. soybean futures closed 51 3/4 cents higher at $10.67 1/2.

July wheat futures ended 4 3/4 cents higher at $4.61 1/4.

July soymeal futures closed at its daily limit up of $20.00 short ton higher at $359.70. July soyoil futures closed $0.61 higher at $33.44. 

In the outside markets, the Brent crude oil market is $1.01 per barrel higher, the U.S. dollar is higher, and the Dow Jones Industrials are 187 points higher.

WASDEMay10chart3
TRADE REACTION

Sal Gilbertie, Teucrium Trading, says the surprise takeaways from this report have to be the lower-than-expected soybean ending stocks and an across the board increase in global demand for corn, soybeans, and wheat to record levels, especially for the 2016-17 season.

“Increasing projected demand seems to be offsetting projected near-term high stock levels, which puts pressure on farmers and Mother Nature to keep production levels high,” Gilbert says.

Unofficial estimates for South American production seem to indicate the USDA could be overestimating South American production numbers, which further intensifies the need for farmers to achieve high yields in the entire Northern Hemisphere this season, Gilbertie says.

“The season is off to a good start for both early planting progress and emergence, but the demand picture painted in this report will require the weather to be nearly perfect again this season in order to fulfill global demand,” Gilbert says.

Jack Scoville,The PRICE Futures Group senior market analyst, says that the big bullish news came in the beans and has been in the beans all day.  

“In Brazil, CONAB, that country’s equivalent to USDA, cut the soybean production Tuesday more than expected to just under 97 million tons. It also cut corn production in a big way, but this was pretty well known due to the drought,” Scoville says.  

The bean cut, although much smaller, was a surprise and sent the market up to start the day, Scoville says.  

“Then USDA came out with bullish ending stocks estimates for soybeans, especially for next year’s crop year. This really sent the market north. July soybeans now have a swing target of $11.15 or so, with a second swing up to about $11.85, although that seems like a lot,” Scoville says.

Scoville adds, “The corn is kind of following beans higher, as ending stocks for this year and next year came in at the low end of trade projections.”

Only the wheat data was negative, but wheat is holding due to the rally in the others, Scoville says. “Wild day – we should close strong, and then we should hold the beans higher now,” Scoville says.

Doug Prohaska, senior commodity risk manager at INTL FCStone Financial Inc., says the USDA sees 30-year-high corn carryout playing out in the 2016-17 marketing year.

“USDA increased its 2016-17 corn feed by a substantial 300 million bushels from old crop, projected now at 5.550 billion bushels. It (USDA) increased exports 175 mbu from last year to 1.900 bbu.

Ethanol and industry use increased 60 mbu from last year for a lower-than-expected carryout of 2.513 bbu. However, the 2016-17 corn carryout ia projected among the largest in 30 years, with a stock-to-usage ratio of 15.2%, Prohaska says.

Pablo Fraga, Argentina-based BLD market analyst, says the USDA’s estimates for his country may be a little high.

“Argentina’s soybean output at 56.5 million tons may be a little bit overestimated. But, USDA may be saving something for next month. I think we have 54/55 mill. tons,” Fraga says.

For Brazil, the USDA’s 2015/6 soybean production estimate of 99.0 million tons looks good.

Next year, both Argentina and Brazil look good, it is just a very early estimation and impossible to know. There is incredible corn optimism for next year in Argentina with an estimate of 34.0 million tons.

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