Jon Scheve with weekly market commentary made on July, 7, 2023
While the USDA report last week was bearish corn, the 4 million acre decrease in beans from the March planting intentions was bullish. Plus, old crop stocks were adjusted down slightly too. Both of these factors contributed to the $1.20 rally last Friday and this previous Monday. However, by the end of the week beans had pulled back over 70 cents but are still up 50 cents from just prior to the report. Following provides some report highlights for beans. Harvested vs Planted Acres Like corn, the USDA’s estimated harvest rate more closely resembles 2013 to 2017 versus the lower rate from 2018 to 2022. Considering bean’s higher value this year though, the increased harvest rate may end up being more accurate. If the average from the last five years is used, carryout would decrease by 10% and likely send prices higher over time. Crush and Exports It seems likely the USDA’s crush estimate from the last report will stay consistent. However, the export market could become more volatile. With Brazil’s crop 30% bigger than the US this year, competition will be fierce. But if US yields also drop, the market will need to rally significantly to ration US export demand. Projecting Carryout and Prices The chart below summarizes the USDA categories that have the most impact on prices. I have also included my “Futures Projections” based on various national yield averages. The 2023-2024 carryout estimates assume the USDA does not change demand much in the July report.
A 100-million-bushel carryout is basically like the US being “out of beans” and could force a rally above $17. Moving forward, August weather will dictate bean prices. However, normal yields or China slowing down on buying would limit any price rallies. Also, if US prices are too high, Brazil beans may get imported into the US over the next year. Bottomline: The report may keep beans from retesting the lows from last month. Looking ahead, if August weather is too dry, there will likely be demand rationing through price rallies. On the flip side, if weather is perfect and yields are above trendline, then there is potential downside risk. Either way, without an increase in export demand, a bean rally could be limited.
Jon Scheve Superior Feed Ingredients, LLC
9358 Oak Ave Waconia, MN 55387 firstname.lastname@example.org