Soybean Stocks Overshadowed by Prospective Plantings
March 31st traders and farmers are likely to pay a great deal more attention to the number of soybean acres USDA expects will be planted this season than the number of soybean bushels left in the United States. However, the stocks figure may hold some surprises.
Last December the United States Department of Agriculture reported a surprisingly low Grain Stocks number for soybeans. The agency counts up available bushels of most crops once a quarter; in December, March, June, and September. University of Illinois Ag Economist Darrel Good says the December 1 soybean stocks number implied a record large residual use of soybeans during the first quarter (September-November) of the 2014–15 marketing year.
Quote Summary - Some have explained this low figure by suggesting a larger number of bushels of soybean were in transport on December 1 than in previous years. This explanation was apparently favored by the market and caused March 2015 soybean futures to close 36 cents lower on the day of the surprisingly small estimate. Another possible explanation is that the size of the 2014 soybean crops has been overestimated.
This argument might be supported by higher than expected soybean prices this year given the estimated size of the surplus projected to be generated by the large 2014 crop. In addition, basis levels have been generally strong for most of the year. Basis is the difference between the price of a futures contract in Chicago and the local cash bid.
USDA’s March 1, 2015 estimate of soybean stocks may add some clarity to this debate writes Darrel Good in his Weekly Outlook posted to the Farm Doc Daily website. Expectations for the magnitude of March 1 stocks are based on the estimate of December 1 stocks, imports during the quarter, and estimates of soybean consumption during the quarter.
If the size of the 2014 soybean crop has been accurately estimated, the March 1 stocks estimate should imply a large negative seed and residual use during the second quarter of the 2014–15 marketing year. That was the case in previous years of very large implied residual use during the first quarter of the marketing year. Seed and residual use during the second quarter of the marketing year, for example, was estimated at –38 million bushels last year, –22 million bushels in 2012–13 and –42 million bushels in 2009–10. A reasonable expectation this year might be near –90 million bushels. A March 1 stocks estimate near 1.41 billion bushels, then, would be consistent with the estimated size of the 2014 crop and known use of soybeans through February.
Given this, if the USDA’s Grain Stocks report shows something substantially different than 1.41 billion bushels on hand, then it should renew the debate over the size of last fall’s soybean harvest. Such a debate, however, would not be resolved for another six months. The USDA’s estimate of the crop size is frequently revised, but not until the release of the September 1 stocks estimate. It comes on September 30th this year.
Good says, historically, implied seed and residual use of soybeans during the first half of the marketing year has not been a good predictor of the size or direction of any subsequent change in the estimated size of the crop.