Grains –
Soybean export premiums are firming around the world. In the case of South America, this is largely due to a lack of farmer selling. In Brazil, the BRL continues to strengthen and soybeans in real terms just don’t look attractive enough to sell at the moment. In Argentina, corn is preferred for cash generation as soybeans remain heavily taxed while corn is not. The Argentine government’s export treatment of soybeans almost ensures further hoarding.
In the US, it actually is a somewhat similar story. Farmer selling is slow, not because of hoarding but largely because the farmer has already moved a large amount of old crop supplies. Additionally, the US is seeing some renewed interest in old crop export demand. Yesterday we saw a flash sale reported and I wouldn’t be completely shocked to see another flash today.
Obviously the NOPA crush data earlier this week was a hot mess, but export demand appears more than capable of fully offsetting declines in the crush. To illustrate this, look at the breakdown attached below showing a snapshot of the current old crop US soybean export program.
First off we need to remind everyone once again we should pay closer attention to the Census figures rather than weekly inspections or shipment data. Making an assumption on April shipments (based off inspection data) we can see we need to average roughly 45 mil bu per month in order to hit the current WASDE projection. Note that we were well over this level during the same period last year, and also note that current outstanding sales are higher than they were at this point last year.
I went through and found one of the highest rollover amounts in recent years and assumed we’d rollover a similar amount this year. In reality, I think that amount will probably end up smaller but I’m trying to be conservative in my old crop export shipment pace here. Even assuming that record rollover amount, we are still likely to ship the amount necessary to match the WASDE projection even if we were to assume zero new old crop sales from this point forward.
Of course such an assumption is very flawed, and note that we saw 171 mil bu of sales from this point forward last year. While I don’t necessarily expect the same level of sales as last year, even if we were to do half that amount, exports could come in perhaps as much as 80-90 mil bu larger than the current WASDE projection. Depending on how tight commercialized supplies out of Brazil actually are this summer, the final total could even be bigger.
So, my point here again is that while the crush is certainly disappointing the export demand is starting to improve and this will prove to be more than an equal offset to the old crop balance sheet. I still envision old crop ending stocks winding near/under 400 mil bu.
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