Much-anticipated WASDE report largely underwhelms soybean market02/08/2019 | Soybean Exports, Soybean News, Economics
By Aaron Putze, APR, ISA communications director
Traders and market analysts anticipating significant moves in the oilseed market following today’s release of World Agricultural Supply and Demand estimates were largely underwhelmed.
Interest in the U.S. Department of Agriculture (USDA) report was high after the release of January’s edition was postponed due to a partial government shutdown.
The report failed to live up to the pre-release hype.
Soybean prices on the Chicago Board of Trade mostly yawned, down just four cents upon its release only to bounce six cents higher within the hour. By early afternoon, March soybeans were off just one cent from the opening bell price of $9.13.
“The market largely shrugged after digesting the numbers,” said Iowa Soybean Association (ISA) Chief Executive Officer Kirk Leeds. “The sideways move in prices reaffirms the market’s inability to anticipate how the U.S.-China trade dispute will be resolved and the ultimate size of South America’s crop.”
The USDA downsized 2018 U.S. soybean production by 56 million bushels – from 4.6 to 4.544 billion bushels. It also reduced U.S. ending soybean stocks 45 million bushels to 910 million.
Iowa soybean farmers produced a 2018 crop of 564.8 million bushels, down slightly from 2017 production of 566.6 million. An unseasonably wet and cool start to last fall’s harvest was the culprit.
The USDA anticipates farmers in Brazil and Argentina will reap a bountiful crop. Harvest in Brazil is nearly one-third complete with production forecasted at 117 million metric tons (mmt). Argentinian farmers will soon head to the fields to bring in a crop pegged at 55 mmt.
To put those numbers in perspective, Iowa traditionally produces around 15 mmt of soybeans.
Stubbornly large, global soybean supplies with no short-term demand bump in sight caused the USDA to set a soybean price trade range of $8.10-9.10. This is largely unchanged from December’s estimate.
“There are a lot of soybeans to be sold,” said ISA President Lindsay Greiner. “If you’re waiting for much higher prices, you’ll be waiting for some time.”
The Keota farmer said he’ll take advantage of any price rally in the short term while joining with other farmers and industry leaders to build demand for the long term.
Greiner will lead an ISA trade mission to China next month. The delegation of farmers and staff will meet with processors and government officials making a case for buying U.S. soybeans and resolving the lingering trade dispute.
The Keota farmer said the report reaffirms the importance of domestic livestock and biodiesel production.
“Imagine where we would be without biodiesel?” Greiner asked rhetorically. “Take that market away and you’d reduce soybean prices another 63 cents.”
ISA Market Development Director Grant Kimberley said today’s report should be a legislative call-to-action in support of renewable fuels.
He urged Congress to pass a multi-year extension of the biodiesel tax credit, bring long-term stability to the Renewable Fuels Standard (RFS) and cease the granting of RFS waivers to small petroleum.
“If we needed a reminder about the importance of biodiesel to our nation’s farmers, this report provides it,” Kimberley said.
Market analyst Al Kluis said the report doesn’t change the market fundamentals.
“I view the numbers positive overall, but the confirmation is still there that we have huge crops to deal with,” he said. “The numbers aren’t as important as the market reaction, so farmers need to remain alert and be ready to sell a rally if we get a possible trade deal with China.”
Contact Aaron Putze at email@example.com.
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