Soybeans tumble after USDA acreage report

Agricultural , Commodities , Corn , Food , Soybaens , USA Jul 02, 2014 No Comments

SoybeanIn its June 30th acreage report USDA acreage report - June 2014, the USDA indicates that soybean planted area for 2014 is estimated at a record high 84.8 million acres, up 11 percent from last year. Area for harvest, at 84.1 million acres, is up 11 percent from 2013 and will be a record high by more than 7.4 million acres, if realized.

As a consequence, soybeans fell to the lowest since December 2011 as the outlook for record seedings boosted speculation that supplies will be ample in the U.S., the world’s top grower. Soybean futures for November delivery fell 0.8 percent to close at $11.475 a bushel on the Chicago Board of Trade, after reaching $11.32, the lowest for a most-active contract since Dec. 16, 2011. Prices tumbled 5.8 percent on Monday, the most since July 2009.

The USDA attributed the soybean planting increase to “much improved” seeding conditions over the spring compared with a year earlier. Planting of soybeans was 95% complete as of June 22, ahead of last year’s pace, when wet weather delayed sowing in much of the country. Many U.S. farmers planted soybeans this year instead of corn because prices for the oilseed have been more favorable.

Still, the soybean-acreage figure was “shockingly large,” said Doug Bergman, a vice president with brokerage RCM Asset Management in Chicago. The report is “extremely bearish” for prices for soybeans that will be delivered after the fall harvest, he added.

For much of the last decade, farmers in the primary corn and soybean growing states of the Midwest had greater profit potential with corn, the strong market driven largely by increasing demand from the ethanol industry. Corn prices surpassed $8 a bushel in August 2012, when a drought that gripped much of the nation reduced the supply of corn amid high demand.

As corn prices remained strong, farmers planted more acres to take advantage of higher profit. Acres planted in corn climbed and in some cases, farmers strayed from the common practice of rotating fields from soybeans one year to corn the next. For a few seasons, some planted corn followed by corn, which often decreases the per-acre yield of the crop because it doesn’t allow the soil to recover. Corn needs an abundance of nitrogen in the soil to flourish, and soybeans increase nitrogen levels in soil. Insect problems including corn rootworms also can increase when corn follows corn in a field, increasing chemical costs.

Many farmers indicated this year that they would return to their corn-soybean crop rotation to both replenish nitrogen in the soil and take advantage of the increased profitability of soybeans.

In the same document USDA acreage report - June 2014, the USDA reported that corn planted area for all purposes in 2014 is estimated at 91.6 million acres, down 4 percent from last year. This represents the lowest planted acreage in the United States since 2010; however, this is the fifth largest corn acreage in the United States since 1944.

Contrary to what could have been expected, corn futures for December delivery fell 4.9 percent to settle at $4.2525 a bushel on the Chicago Board of Trade, the biggest decline since June 28, 2013. This was due in part to the fact that U.S. corn’s condition improved slightly to 75% good to excellent and stocks are almost 40% higher than they were a year ago. The report shows corn on hand in the U.S. on June 1 was 3.85 billion bushels, up 39% from a year ago. Corn on hand on farms is even higher than it was a year ago, the report shows.

Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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