May 24, 2009
Soybean Shortage Sets Time Frame For Dollar Collapse
by Eric deCarbonnelAgweb reports that China chews through U.S. 'old-crop' soybeans.
(emphasis mine) [my comment]
China chews through U.S. 'old-crop' soybeans
The U.S. 'old-crop' soybean plot could continue to thicken this summer, raising prices.
By Mike McGinnis
Agriculture Online Chicago Markets Bureau Chief
5/20/2009, 1:51 PM CDT
CHICAGO, Illinois (Agriculture Online)--The U.S. supply of 'old-crop' soybeans is projected to be the smallest ever this summer.
That is creating a run-up in CBOT soybean futures prices. The July CBOT soybean prices, at $11.85 per bushel, jumped 76 cents from Sunday night to Wednesday
The price surge is also sparking world buyers to secure supplies ahead of any demand-rationing.
A few well-respected U.S. trading firms this week estimated very tight old-crop soybean ending stock estimates. These estimates represent the 2009 soybean crop-year that ends August 31.
Most trade estimates for the U.S. old-crop soybean carryout on August 31, 2009, range between 60 and 80.0 million bushels, vs. the USDA's estimate of 130 million.
"An extraordinarily tight number by historical (or any) standards," says Vic Lespinasse, CBOT market analyst and floor trader with GrainAnalyst.com.
The U.S. domestic soybean meal crush runs about 120 million bushels per month between August and November. By November, crush is ramped up to 150 million bushels. "So, we're going to either run out or ration the crusher," the unnamed floor trader says.
HOW IT HAPPENED
The idea of tightening U.S. old crop soybean stocks has been around awhile. But, it's been a quick turnaround in perception, CBOT floor traders say.
The road to very tight supplies started with the Chinese government announcing it is procuring 7.0 million metric tons of soybeans for its state reserve.
On Wednesday, news reports indicated the Xinhua, the official Chinese news agency, says unnamed Chinese experts want the government to use some of its massive foreign currency reserves to build up a Chinese bean stockpile of 50 million metric tons. [I have been suspecting this for some time. China is buying up all domestic soybean productions, forcing their domestic crushers to import US soybeans. This reduces China’s trade deficit and accumulation of dollar reserves.]
Lespinasse says this is unimaginable and will not happen. "But it makes one wonder why Xinhua would even print such a story." [because it is obviously true. Or perhaps China’s soybean crop has been hurt worse by drought then they are willing to admit.]
China announced its stockpiling initiatives at a time when Argentina's 2009 soybean production, hurt by drought, was much worse than people thought.
On Wednesday, the Argentine Rural Confederation (CRA), an Argentine farm group, estimates Argentina's soybean crop at just 30.5 million metric tons, below earlier estimates from other Argentine groups of 50.0 million.
Plus, Argentine exports have been hurt as a result of farmer strikes. In addition, Brazil's soybean production is down a few million metric tons.
WORLD SOYBEAN CONSUMPTION
The world consumes roughly 6.0 million metric tons of soybeans per month. Brazil has been working hard to put out 4.0-4.5 million metric tons a month. Argentina's exports have been hit-and-miss with about 1.0 million metric tons. That leaves the U.S. to export 1.0 million metric tons of soybean exports.
As world buyers find the U.S. as the more reliable supplier of soybeans, more business than expected is being done.
The Chinese front-run the rest of the world on soybean consumption. They started their soybean stockpiling before anyone realized the lower world soybean production, such as in Argentina and Brazil [This is called being smart]. As a result, regular U.S. soybean product customers such as Mexico, Japan, Taiwan, and Europe have been scrambling looking for secured supplies. "They don't want to wait for the fall harvest and find out there is nothing to buy, because everything is bought up already," one CBOT floor trader says, choosing to remain anonymous.
SOYBEAN PRICES SPIKE
Price-wise, traders came into the week thinking soybeans were high enough. Subsequently, Egypt, an unusual customer, buys 120,000 metric tons of old-crop U.S. soybeans."It's an odd name. For a nation like that to come in and buy at this point, is creating sharply higher U.S. soybean business at this time of the year," the CBOT floor says.
ENCOURAGING FARMER SALES
A separate supply problem occurs when the U.S. crushing companies have to take a month off, due to a rationing move. At that point, where will buyers get soymeal supplies?
An early U.S. Delta harvest is being counted on to help out with a short U.S. soybean supply, traders say. "We'll be looking for new-crop soybeans this fall coming off the farm and right to the market. The only way to incent that is with high prices," the anonymous CBOT floor trader says.
ALL EYES ON CHINA
While one never knows where China will quit buying soybeans, there are a few indicators to watch for clues.
Jason Ward, Northstar Commodity Investment Co., says watch the domestic price of Chinese soybeans. "Wednesday night, China's beans settled at $14.88 per bushel, up 20 cents. If their domestic price stays well above U.S. prices, it is hard to forecast that they stop buying. Landed prices, to China from the U.S., range between $12 and $12.50. So, China is still buying our product considerably cheaper."
[I have been predicting hyperinflation would start in China, leading to the dollar’s collapse. This is exactly what is happening.]
Secondly, as long as soybean crush margins remain positive, China should continue to buy beans. "They are making between 70 and 90 cents/bushel in crush margin right now, and that margin is even better buying U.S. soybeans than crushing their own," Ward says.
Finally, China's soybean-buying appetite can be tracked by the Chinese Stock Market, Ward says.
"The Shanghai Index is in a 7-month high trading pattern and at the highest level since August of last year. China is leading the global economic recovery, and with continued stimulus from the Chinese government, it appears they are going to continue to grow," Ward says.
When one of the above items changes, it would raise a red flag for this old crop soybean story, Ward says. But, as long as all three continue to be working, higher prices are still ahead.
Commodity News Center reports about Soybean Magic.
Soybean Magic:
5/20/2009
Allendale Inc is not surprised by recent CBOT floor trade discussion regarding the potential for 2008/09 old crop soybean stocks to approach 75-77 million bushels. Within the last month nearly daily discussion took place of the eroding Argentina soybean crop, but with its harvest more than 90% complete and present Buenos Aires Grain Exchange production estimate of 32.8 million tonnes, it appears as though soybean bulls have switched pastures from Argentina to the US.
Presently USDA is forecasting 2008/09 end stocks of 130 million bushels which compares to its month of April estimate of 165 million bushel and year ago May estimate of 145 million bushels.
Allendale Inc would like to explore the potential for USDA to drop old crop soybean end stocks below 100 million bushels, let alone down to a level of 75-77 million bushels. If history is a good teacher we may only have to venture back to just last year as an example of what tactics measures USDA may utilize in order to keep projected days of supply above the existing 16 which mirrors 2003-04 (see graph).
We can look back to the April 2008 WASDE to see just how quickly USDA was able to find an extra 77 million bushel of soybeans by reducing soybean residual use. Residual use may be defined as “reflects handling losses, on-farm extrusion of soybeans, and a statistical error term. Not only was USDA capable of discovering 77 million bushels of soybeans in its April WASDE to help offset the 55 million bushel of increased exports and 5 million bushels for crush, it went a step further in its July WASDE to post a negative 35 million bushel of soybean residual. USDA’s reasoning was for the -35 million bushels was the June 1, 2008 quarterly soybean stocks indicated a below average residual.
There you have it, simply stated USDA was able to discover an extra 113 million bushels of soybean supply within its “residual use” accounting column to possibly ensure soybean end stocks would not slide below 100 million bushels. [Soybean manipulation… The US government is manipulating data to keep soybean prices down… This is so pathetic…]
You may find it interesting, USDA presently has a rather “ripe” 73 million bushels of soybean residual use factored into the present balance sheet, just ready for its picking. The question is, just when could USDA harvest this particular residual? Will USDA hold out until the July WASDE, after its June quarterly stocks report or discover less soybeans were lost during handling, or on farm extrusion or chalk it up to an oversight statistical error, sooner? Remember, less than a year ago USDA was able to discover an extra 113 million bushels of soybean and if USDA decides to go statistically negative once more in 2009, may have room to discover as much as 109 million bushels at the stroke of a pen.
Questions remain, could USDA find the magic necessary to ensure adequate old crop end stocks within the next month or two? [No] How could its decision impact your old crop and for that fact new crop marketing, or investment strategies?..........Joe Victor
Here is a batch of entries on the soybean situation from Nogger’s Blog. Sorry for the info overload on soybeans, but I believe what is happening with soybeans is incredibly important.
Tuesday, 12 May 2009
Could The US Run Out Of Soybeans?
China continues to import soybeans at an astonishing rate with latest estimates showing that they imported almost 14 MMT in the first four month of 2009, 36% higher than a year ago, according to official customs data.
April imports alone were 55.2% higher than a year ago at 3.71 MMT, as the government continued to buy beans aggressively on the domestic market hoping to stimulate the economy and maintain growth. This keeps forcing Chinese crushers to look to import.
How long can they keep this up for remains the big question.
A little while longer yet seems to be the answer, as May imports could reach an all-time record 4.2-4.6 MMT according to one local analyst.
Buying at this kind of pace, particularly if much of the business keeps going America's way, looks like continuing to support the nearby market even if US plantings end up increasing by another 2-3 million acres.
They're not physical beans. If spot beans is what you want then you'll have to pay up. With US ending stocks already tight, we will know by how much later today, we could be in for a very interesting summer.
Could the US run out of soybeans? It's not that unthinkable, they very nearly did last year. As I put on the blog yesterday limitless and expiring September 2008 soybeans posted an astonishing gain of 274c on the last day of trading as delivery wasn't an option for short sellers getting squeezed by a lack of physical beans.
And China wasn't taking beans at anything like the current rate then, plus Argentina hadn't just had a crop disaster. Incidentally I read somewhere last night that Argy farmers have already got 50% of their crop sold according to the Rosario Grain Exchange. That would make sense as they probably desperately need the cash and are wary of any further government tinkerings after the June mid-term elections.
Thursday, 14 May 2009
USDA Export Sales: China Have Not Left The Building
Today's USDA weekly export sales report confirms that China are still buying US soybeans, putting further pressure on already tight US soybean stocks.
For the period May 1-7, 2009 export sales came in as:
Soybeans: 401,900 MT old crop and 353,000 MT of new crop. China took 132,300 MT old and 178,000 MT new. Expectations were for sales of 650-750,000 MT old & new combined.
Corn: 936,800 MT old crop and 246,000 MT new crop against expectations of 800k-1 MMT combined.
Wheat: just 102,600 MT old crop and 131,500 MT new crop. Expectations were for 250-400,000 MT.
Actual exports for the week were 442,200 MT for soybeans, with 176,000 MT heading for China. Corn exports were record large for the current marketing year at 1,272,300 MT. Wheat exports were so-so at 311,100 MT.
The bean sales were solid, and the continued presence of China will undoubtedly add underlying support. Corn sales were robust yet again, wheat sales continue to disappoint. Record large corn exports are impressive at this stage in the campaign.
Thursday, 14 May 2009
CBOT Soybeans Couldn't Go To USD15+ Could They?
Soybeans
July soybeans closed at $11.47 ½, up 19 ½ cents. The main driving force in the current market is demand, nearby China are still buying way too many US beans for the supply/demand equation to be comfortable. The USDA cut US ending stocks from 165 million bushels to 130 million earlier this week, that is the tightest ending stocks since 2003. Yet already that looks optimistic, things are shaping up to get way more tighter than even that. Stocks to usage is 4.3%, that is the tightest since 1968, and China just keep coming back for more. They bought 132,300 MT old crop and 178,000 MT new crop according to the USDA today. Export sales for the last four weeks are double what they were a year ago. The US will run out of soybeans to sell at this rate long before the late-planted new-crop becomes available. Ending stocks are currently projected to be 130 million bushels, more than a third less than a year ago. And physical stocks got so tight then that the September contract moved up 274 cents on the last day of trade. Where prices will go then is anybodies guess. $15...$18...$20... come on now, you are taking the pi$$? No, I wouldn't be surprised. Forget how many new crop acres will be planted, it's irrelevant. If you want soybeans prior to next harvest you are going to have to pay. Handsomely IMHO. But what do I know?
Tuesday, 19 May 2009
CBOT Closing Comments
Soybeans
July soybeans settled 16 cents higher at $11.46 1/2 a bushel. Higher crude oil, a steady stock market and weak dollar supported beans. Warmer and much dryer conditions have begun across Missouri, Illinois and Indiana. The next ten days will continue to see this new dry trend, says Allen Motew of QT Weather. This may scupper trade ideas that an extra million acres intended for corn will get switched into beans. Temperatures reach 20-24 degrees above normal over the Central High Plains today and tomorrow with the “heat” moderating and spreading eastward into the Corn Belt on Tuesday, he says. This should enable US farmers to wrap up much of their corn planting and get cracking with soybean seedings. As of Sunday night 25% of the soybean crop was planted, according to the USDA, still lagging well behind the five year average of 44%.
Wednesday, 20 May 2009
Has Anyone Seen My Panic Button?
The lowest estimate yet for this season's Argentine soybean crop comes from the Argentine Rural Confederation, or CRA, who now peg the 2009 soybean crop at just 30.5 MMT. That's a far cry from early season expectations of a record 50 MMT harvest, and highlights why China just keep coming back for more US soybeans. As well as quantity, quality seems also set to be an issue with Argentine beans this year, reducing US stocks to precariously low levels. Earlier this week Informa pegged August 31st US ending stocks at just 77 million bushels, significantly lower than the USDA's figure of 130 million released last week, and the smallest stocks since 1972. Stocks to usage meanwhile is the tightest on record at 4.3%. To put this into perspective, the Informa figure equates to just one week's supply, which is incredibly tight considering the late start to planting in the US.
Thursday, 21 May 2009
USDA Export Sales Report: Where Are All The Cancellations Than?
The USDA's weekly export sales report said that 700,600 MT of old crop soybeans were sold in the week ending May 14th and a further 667,000 MT of new crop. That comes in considerably higher than trade expectations of combined sales of 650-800,000 MT and should add some underlying support this afternoon. Early calls had been for beans to open 9-12 cents lower in line with the overnight theme, and ahead of a three-day weekend some profit-taking and book-squaring was expected.
There was undoubtedly a lot of interest in this report as the USDA's website crashed, delaying the issue of the figures. Old crop sales were up 74 percent from the previous week and 12 percent from the prior 4-week average. Increases were primarily for China (192,600 MT), Egypt (161,900 MT), and unknown destinations (128,000 MT).
New crop sales were were mainly for unknown destinations (293,500 MT), China (236,000 MT), and the United Kingdom (60,000 MT).
Where are all the cancellations? Good question, actual exports were 413,500 MT with 190,300 MT of that setting sail for China.
Thursday, 21 May 2009
CBOT Closing Comments
Soybeans
July Soybeans at $11.75, up 6 cents, and November Soybeans at $10.23 ½, up 9 cents. Weekly export sales were very strong, and yet again talk of Chinese cancellations, or at the very least deferrations, once again failed to materialise. In fact if Chinese purchases continue at this kind of level then we are potentially looking at the tightest US ending stocks in many years, possibly on record. This is a situation that should not be underestimated, with late plantings and therefore maturity & harvesting, coupled with the dramatic crop reductions in Argentina, the US is in very real danger of running out of soybeans this year. I know that this probably sounds like a ludicrous situation, but leaving yourself exposed to buying spot soymeal in Europe in August/September is a very dangerous game to play. With spot hi-pro prices now already in the GBP300's I wouldn't be surprised if things didn't have a 4 in front of them come mid-summer, if you can buy it at all that is.
Friday, 22 May 2009
eCBOT Close/Early Call
The overnight markets closed steadier with beans around 10-14 cents higher, and corn & wheat both up around 4-6 cents.
July beans closed at session highs of $11.84 3/4, within sight of Wednesday's 8-month high of $11.89 1/2. Another week of monster export sales, pushing almost 1.4 MMT, and the ever-present China and their euphemistic chum "unknown destinations" are really beginning to put the frighteners on this market.
Where were the cancellations that the market has been talking about for weeks, nowhere to be seen yet again. Today's story is that China are cancelling and/or rescheduling South American beans. It seems quite unlikely that they'd be cancelling with prices at eight month highs.
So why aren't they rescheduling US beans? Is it because of quality issues with South America? If it is then those problems aren't going to go away any time soon.
Already the most recent USDA estimate for Aug 31st ending stocks of 130 million bushels looks way too high to me, we've had sales of 1.1 MMT of old crop beans in the last fortnight since that number came out. And of course a potentially late harvest means that those beans have got to last into the beginning of September too.
My reaction: The US will run out of soybeans by the end of this summer.
1) The USDA is manipulating data on soybean inventories to hide an enormous shortage.
“Simply stated USDA was able to discover an extra 113 million bushels of soybean supply within its "residual use" accounting column to possibly ensure soybean end stocks would not slide below 100 million bushels.
2) Demand from China is largely responsible for the US soybean shortage.
“The Xinhua, the official Chinese news agency, says unnamed Chinese experts want the government to use some of its massive foreign currency reserves to build up a Chinese bean stockpile of 50 million metric tons.”
“In fact if Chinese purchases continue at this kind of level then we are potentially looking at the tightest US ending stocks in many years, possibly on record. This is a situation that should not be underestimated, with late plantings and therefore maturity & harvesting, coupled with the dramatic crop reductions in Argentina, the US is in very real danger of running out of soybeans this year.”
3) Wednesday night, China's beans settled at $14.88 per bushel, which is three dollars above the US’s Friday closing price of $11.84.
THIS IS EXACTLY WHAT I HAVE BEEN EXPECTING
I have been predicting hyperinflation would start in China, leading to the dollar's collapse. This is exactly what is happening. Stimulus efforts and money printing by Chinese authorities is creating massive upwards pressure on commodity prices, especially soybeans. This intense demand for physical commodities is bringing US future markets to their knees.
Conclusion: Now there is a clear time frame for the dollars collapse: it will happen this summer.
1) A default on soybean contracts would quickly lead increase demands for delivery on other contracts (especially gold/silver), leading to more defaults and the collapse of US futures markets.
2) The collapse of the COMEX would lead to an enormous spike in all commodity prices, as investors/end users scramble to secure limited physicals supply.
3) In order to keep domestic prices from spiraling uncontrollably upwards, nations around the world will start selling off their US reserves to boost their domestic currencies.
4) Considering the dollar holdings of foreign governments are about $5.4 trillion, this will rapidly destroy the dollar’s worth.
Final thoughts
I can’t believe I am writing about soybean manipulation…
I really, really hope the US runs out of gold before soybeans. It would be so terribly pathetic if the event which brings down the COMEX and the US financial system is a default on the US’s obligation to deliver soybeans… Can you imagine it, having to read in history books, “It was a default on the US’s obligations to deliver soybeans which set in motion a chain of events…”
Having the US default on soybeans before gold would be just so pathetic…
(BTW, it is my birthday today, so no more entries for the next 24 hours.)
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