Soybean Prices Fall to Six-Month Low
Soybean futures drop 1.9% despite forecast for tighter-than-expected U.S. supplies
By JESSE NEWMAN
Updated April 9, 2015 7:46 p.m. ET
U.S. soybean prices slid to a nearly six-month low, as concerns about rising global supplies and softer export demand overshadowed a government forecast for tighter-than-expected domestic stockpiles.
Corn and wheat futures also closed lower.
Soybean prices declined after the U.S. Agriculture Department estimated domestic inventories before this autumn’s harvest would total 370 million bushels. That was slightly below analysts’ expectations for 371 million bushels, but analysts said traders shrugged off the government’s projection because it was only a minor difference in size.
Analysts noted that many market watchers are concerned that U.S. and global soybean stockpiles will be much higher than last year’s, and U.S. growers are projected to plant record acreage this spring. China, the world’s biggest soybean buyer, also has been shifting purchases away from the U.S. to rival producers in South America.
Soybean futures for May delivery fell 18 cents, or 1.9%, to $9.535 a bushel at the Chicago Board of Trade, the lowest settlement price since Oct. 20.
“This is a report traders will likely quickly forget,” said Rich Nelson, director of research at commodities brokerage Allendale Inc. in McHenry, Ill. He added that soybean futures for the coming season remain “far overvalued.”
The USDA also gave a slightly higher-than-expected forecast for global soybean stockpiles, which weighed on futures. The government projected global reserves at 89.6 million metric tons, above analysts’ estimates of 89.5 million. Supplies are rising, thanks to a record U.S. crop last autumn and forecasts for a record crop in Brazil this year.
“The U.S. numbers were pretty positive, but we’re in this global supply excess mind-set in the trade so the U.S. numbers mean less,” said Mike Zuzolo, president of advisory firm Global Commodity Analytics in Atchison, Kan.
The USDA left its estimate for soybean output in Brazil at a record 94.5 million metric tons. The USDA said farmers in Argentina will likely produce 57 million metric tons, higher than the 56 million it forecast in March.
The government pegged U.S. corn inventories at 1.827 billion bushels at the end of the 2014-15 season, up from its March estimate of 1.777 billion but below analysts’ expectations for 1.851 billion bushels.
Globally, the USDA said corn stockpiles will total 188.5 million metric tons, up from 185.3 million projected in March.
The USDA projected corn output in Brazil at 75 million metric tons, the same as it estimated last month. Farmers in Argentina will likely produce 24 million metric tons, higher than the 23.5 million tons forecast by the USDA in March.
CBOT May corn futures dropped 1.25 cents, or 0.3%, to $3.78 a bushel.
Wheat prices also pared losses after the USDA report projected smaller-than-expected U.S. and global stockpiles in the 2014-15 season ending May 31, though supplies are larger than last year.
The government estimated U.S. wheat inventories as of May 31, the end of the season for that commodity, at 684 million bushels, lower than the 691 million estimated in March. World-wide, wheat supplies this year will reach 197.2 million metric tons, slightly lower than last month’s estimate of 197.7 million tons.
CBOT May wheat futures dropped 7.5 cents, or 1.4%, to $5.1875 a bushel.
Despite modest reductions in domestic wheat inventories, analysts said traders remain pessimistic about export prospects for the grain, given stiff competition from rival exporters who are offering supplies at cheaper prices.
“European wheat is flying off the shelves,” said Mr. Zuzolo of Global Commodity Analytics.
Analysts said a rising U.S. dollar pressured crop prices further on Thursday, as a stronger currency makes domestic supplies more expensive for foreign buyers.
With many of the USDA’s projections Thursday aligning closely with expectations, analysts said traders’ focus would likely shift to the weather as the dominant factor in grain futures prices as farmers move ahead with planting in the U.S. Farm Belt.
“Weather’s going to dictate [market activity] from here on out,” said Joe Lardy, research analyst with CHS Hedging in suburban St. Paul, Minn. The USDA report was “kind of a sleeper.”