Hello Pro Farmer Members!
Front-month soybean futures surged above $11 for the first time since September 2014 and hit their highest level since July 2014 this week. Soybeans have now posted their longest run of weekly gains in 12 years. Meanwhile, corn futures firmed to their highest level since last October.
While much of the bull rally has been speculative-driven, there’s fundamental backing from export demand. Smaller-than-expected South American crops have pushed more soybean and soymeal export business to the United States. And more soybean export demand is up for grabs. Brazil's and Argentina's 2016 soybean crops will each be 4 MMT (147 million bu.) to 6 MMT (220 million bu.) smaller than once anticipated. That's a lot of South American soybeans that must be replaced.
Argentina received more rains this week. The latest rains may not further reduce Argentine soybean crop size, according to Pro Farmer South American Consultant Dr. Michael Cordonnier, but the wet weather kept harvest well behind normal and adds to crop quality concerns. Meanwhile, Brazilian soybean exports have peaked. After exporting 30.8 MMT of soybeans from January to May, the export pace is expected to slow dramatically from June through December. If Conab's (Brazilian equivalent of USDA) export estimate is accurate, the country will only ship 24.2 MMT of soybeans from June through December.
The South American situation opens the door to more (potentially a lot more) U.S. old- and new-crop soybean and soybean meal export business.
Meanwhile, corn export demand remains red-hot. Old-crop corn export sales for the week ended May 26 totaled 1.318 million metric tons (MMT; 51.9 million bushels). That’s the fourth consecutive week and seven out of the past eight weeks that old-crop corn export sales topped 1 MMT. USDA's corn export forecast once looked too high, but now it is too low. After raising the export forecast by 75 million bu. in May, we anticipate a similar hike again in the June 10 Supply & Demand Report... and that may not be enough. While some Asian buyers are actively booking feed wheat, there's still plenty of export demand for U.S. corn, as Brazil is virtually out of corn and much of its safrinha crop (most of which normally gets exported) will be used to replenish domestic supplies and Argentina's harvest delays have pushed back anticipated exports. Plus, South Africa is going to import, not export, corn this year due to drought.
Speculative money flow has been the story in the soybean market (and to a lesser degree the corn market) to this point, but keep an eye on exports. Export demand has the potential to grab headlines moving forward in both the soybean and corn markets.
That's it for now...
... have a great weekend!
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