US 2013 soy production looks promising

The USDA''s July 29 Crop Progress report rated the 2013 soy crop as 63% good to excellent compared with 29% for the same timeframe in 2012, while poor to very poor ratings were just 9% against 37% one year ago.

The next World Agricultural Supply & Demand Estimates report (WASDE) comes out on August 12, and traders will study the numbers in that report.

At that same time, the USDA will share the results of resurveying soy acres in 14 states in July. The information will be published in the August 12 Crop Production report.

As of July 11, the USDA projected a US soyyield of 44.5 bushels/acre, and soy production of 3.42 billion bushels. Ending stocks were pegged at a healthy 295 million bushels. Global soy production in that report was projected at 10.5 billion bushels.

The good news is that demand for soy will remain strong. The USDA, in their July WASDE report, estimated that China will import 2.535 billion bushels of 2013-14 soy, the EU will import 444.6 million bushels, Japan- 101.4 million bushels and Mexico- 130.4 million bushels.

With a growing population and economy, China is rapidly increasing their fish and hog industries. Their land capacity to grow row crops is limited. They also import 96% of the soy they crush.

"The dynamics of world growth are pretty good. China is going to need the US farmer every year," said Ron McDaniel, trader and commodity analyst at the Minneapolis Grain Exchange.

On the Chicago Mercantile Exchange (CME) Group exchange, soy futures on August 2 traded with September at US$12.115, November at US$11.80, January at US$11.85, March at US$11.88, and May 2014 at US$11.89/bushel. Compared with prices back on July 19, September was US$1.175 lower, November was US$0.955 lower, January was US$0.96 lower, March was US$0.92 lower and May was US$0.91 lower.

McDaniel suggested that US farmers are more likely to store their corn this fall, and sell their soy.

As of August 2, the nearby futures market had a soy-to-corn price ratio of 2.55 to 1. Historically, the ratio has been about 2.3 to 1, and McDaniel thinks even a ratio of 2.45 to 1 is pretty good.

"Early on, soy is still tighter than corn," he said, adding the 2012 soy carryout is projected at 125 million bushels."

In the July WASDE report, USDA forecast a season-average 2013-14 soy price of US$9.75-US$11.75/bushel. At one elevator in western Minnesota followed in this column, cash soy was US$12.32 with a basis of US$0.50 over on August 2. Compared with the cash quote on July 19, the price was US$2.58 lower, but the basis had improved by US$0.50.

The new crop bid for October was US$11.22 with a basis of minus US$0.60, which was in line with the USDA forecast in July. Weather across the US for the months of August and September is expected to have a significant role in soy production and prices.