Scarce soybeans stay in CBOT spotlight

August 31, 2009

rainbow1It’s crunch time for soybeans — if only processors could find any to crunch.
     
The protein-rich bean, in huge demand around the world for foods from edible oil and tofu to feedstocks for both animals and biodiesel plants, is in the grip of a supply scare.
    
The United States, the single-largest grower and exporter of soy, is forecast to produce a record-large crop of 3.2 billion bushels this year. Harvest starts in the Midwest grain belt in a few weeks.
    
So why did Chicago Board of Trade soybeans of September delivery reached a two-week high of $11.64-3/4 a bushel on Friday? Because while supply will be big, demand — nervous demand — will be bigger, at least for a while.
    
“If soybeans are ever going to be tight, it’s right now — it’s this week, it’s next week, into the new crop,” said Dan Cekander, a grain market analyst at brokerage Newedge USA. 
    
The U.S. soybean marketing year ends on Aug. 31, with the opening of the traditional harvest month of September. On that date, U.S. soybean stocks-on-hand are expected to have fallen to a 32-year low — with more declines seen before harvest can replenish supplies for processors and exporters.
    
“The other problem you have exacerbating the situation is the new-crop maturity is delayed, so the harvest is going to be delayed. So it’s not like you can all of a sudden turn on a lot of new-crop supplies — just because the old-crop marketing year ended,” Cekander told Reuters TV on Friday.
    
Active soy harvest in the central Midwest — Illinois and Iowa alone produce a third of all U.S. soybeans — is not expected until the third or fourth week in September.
    
So U.S. cash soybean prices soared last week as exporters and processors kept battling over dwindling old-crop supplies. Exporters at New Orleans were bidding as much as $2.10 per bushel over CBOT November futures prices to draw in soybeans on Friday, up from a premium of $1.35 over a week earlier.
    
Processors tried to compete but many continued to be forced to take extended “down time” for lack of bean supplies to crush into soybean meal, a popular high-protein livestock feed, and oil. Some Midwest brokers were quoting prices of up to $100 per ton above CBOT September futures for loaded railcars.
    
“What that tells you is that there are end users right now paying prices as high as they paid at the very height of the bull market a year ago in 2008″ for soymeal, Cekander said. 
    
Driving the strength in prices continues to be China’s torrid buying. But a drop in temperatures this week in the Midwest also sent a shiver through traders fearing an early frost that might cut yields in soybeans.
    
CBOT prices fell on Monday amid outlooks for milder U.S. crop weather through the middle of September. Also weighing on prices were worries that China may unilaterally terminate derivative contracts with some foreign banks that provide over-the-counter commodity hedgers services.
PHOTO: Northwestern Illinois fields after an August shower taken by Christine Stebbins

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