Local soybean basis strengthens as futures move lower

By ANDREA JOHNSON, Assistant Editor
Sunday, November 23, 2008 7:09 PM CST

Soybean prices moved lower in mid-November, the result of larger supply and smaller demand.

“Are farmers selling? They're not selling at these lower prices. There isn't a great deal of interest,” said Joe Victor, vice-president of marketing for Allendale Inc.

Soybean futures closed on the Chicago Board of Trade on Nov. 14 with January at $8.96, March at $9.05, May at $9.16, and July at $9.24 per bushel.

Compared with prices two weeks earlier, the January contract closed 37 cents lower, March was 40 cents lower, May was 41 cents lower and July was 36 cents lower.

Prices moved lower as the USDA announced weekly exports sale of 478,300 metric tons, or 17.6 million bushels. About half of those sales (207,700 metric tons) were to China. The export sales number was considered bearish.

The Chicago Board of Trade website announced that soybean oil sales were good, but U.S. cumulative soybean oil sales were trending at 17 percent of the USDA yearly forecast. Normally, the U.S. has sold about 24.4 percent of its soybean oil to export markets by this time in the marketing year. Mexico was the major soybean oil purchaser in early November.

Victor said he expects to see significant soybean export sales in the future with both China and Japan remaining dominant soybean users.

“There's been a great misperception out there, and continues to be almost year after year, that when we see a higher dollar, that is expected to choke off the exports for U.S. grains,” he said. “We've run studies over the past 20-year span, and we can find no correlation between a rising U.S. dollar and choking off exports for U.S. goods.”

The U.S. crush number for October of 143 million bushels was about 2 million bushels higher than expected. The Chicago Board of Trade website also said traders were looking at favorable weather conditions in Brazil and dry conditions in Argentina in mid-November.

Once the market has a good idea of South America's soybean production, they will turn to 2009 U.S. projected plantings.

“Because of the lateness in the corn harvest progress, we're not going to be putting in the same kind of wheat acres we had initially anticipated. U.S. wheat acreage could be down 2-3 million acres for the 2009 harvest,” said Victor.

At one western Minnesota elevator followed in this column, cash soybeans on Nov. 14 were $8.41 per bushel with a basis of 55 cents under. The price was 20 cents lower than on Oct. 31, but the basis had narrowed by 17 cents. Basis is strengthening in the soybean market.

Producers will want to keep in touch with their elevator managers regarding any opportunities to supply soybeans at profitable prices.

“When we have 50-60 percent of the harvest in, we typically set our harvest lows,” said Victor.

The National Ag Statistics reported on Nov. 10 that U.S. soybean production was down 1 percent from the October report. Production for 2008 is pegged at 2.92 billion bushels.

Based on Nov. 1 conditions, yields averaged 39.3 bushels per acre.

The USDA lowered the average U.S. soybean yield because of flooding that occurred last spring. The market had already taken a lower average soybean yield into account.

Global soybean year-end stocks of 54.6 million tons (2 billion bushels) are a neutral number, Victor said.

He spoke to ag media following the release of the Nov. 10 crop production report. The Minneapolis Grain Exchange sponsored the teleconference.

Victor encourages producers to continue to watch the markets and U.S. weekly export sales for indications of global soybean use.

“The way the soybean demand is occurring and the instability of what is happening in Argentina plus less production in Brazil, (means) there may be a real battle for corn battling soybeans for every possible acre they can get their hands on in 2009,” Victor said.

Comments »

Comment on this story

Comments will be approved within 48 hours

Name:

Email: (optional)

Comments:

Image Verification: (Case sensitive)