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Karl Setzer

By Staff | Nov 23, 2012

Neither farmers nor commercials are showing any interest in marketing soybeans at this time.

The next flush of soybeans will likely come near the end of this calendar year. Any significant corn or soybean movement, for that fact, will most likely be in early 2013.

Basis values indicate most buyers do not have enough coverage to make it that far, especially soybean processors.

Soybean buyers continue to push for deliveries in an effort to capture elevated crush margins. Even with today’s higher-than-normal soybean futures, the values of meal and oil are a great benefit to the industry.

The average return on crushing soybeans right now is between $1.05 and $1.10 per bushel. With this return, crushers will push bids as hard as they need to secure soybean inventory.

Chinese officials believe that country’s soybean imports will continue to grow. These individuals believe China’s soy imports will expand at a rate of 5 to 6 p percent per year over the next five years.

This is actually slower than in recent years as Chinese bookings this year are already 18 percent greater than last year. Much of these imports are needed to fill government storage facilities that were emptied to cover domestic needs.

Trade continues to debate South American crop production estimates. More interest in grain production is focusing on corn though, not soybeans as it has in the past.

Brazilian officials claim their corn crop will be roughly 2 million metric tons greater than what the U.S.Department of Agriculture is forecasting at the present time.

Argentine officials are not as positive and believe their corn crop could be up to 7 million tons less than initial estimates due to stressful weather conditions.

As it always is, the condition of Brazil’s infrastructure is being questioned. This is becoming more of a factor as South America becomes more of a corn and soybean supplier to the global market.

It is interesting to note that the current usable portion of rail lines in Brazil is less than it was 90 years ago. This means much of South America’s grain production must move by truck, sometimes as far as 1,300 miles in one direction.

While most talk in potential crop sizes has focused on the U.S. and South America, there are also projections being made for China. The U.S. attache in China is predicting a soybean crop between 10 and 12.5 million metric tons this year.

This estimate range compares to the latest USDA estimate for 12.6 million metric tons. Even with a slightly larger-than-expected Chinese soybean crop, the country will still need large imports, as much as a 33 percent increase in the next three years.

China’s corn crop is expected to be 3 percent larger in 2013 over 2012 at 198 million metric tons. This is also below recent projections for the crop to fall between 200 and 205 million metric tons.

As with soybeans, corn imports will still be needed to cover an ever-growing demand.

Private analysts expect next year’s global corn output to spike from that of this year.

World corn production is forecast to rise 111 million metric tons in 2013.

The majority of this increased corn production is forecast to come from the United States where a 3.9 billion bushel rebound in crop size is expected.

This increase in the U.S. corn crop is being based off normal growing conditions though, which the U.S. has not experienced for three years.

Karl Setzer is a commodity trading advisor and market analyst at MaxYield Cooperative. He can contacted at ksetzer@maxyieldcooperative.com.

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