February 26, 2004

 

 

US Soybean Sales Slow On Anticipation of Higher Prices

 

US soybean farmers are not rushing to get rid of their soybean crops due to an anticipation of higher prices, grain industry sources said.

 

Concerns about shrinking domestic soybean supplies and weather damage to the South American soybean crop pushed soybean futures to 15-1/2 year highs on Wednesday. But many U.S. farmers have still been hesitant to capitalize on old-crop prices as high as $9.50 for soybeans.

 

"For the most part selling has been real light. That's one of the reasons the market has been able to accelerate so fast," said Dan Zwicker, grain analyst with Agrivisor Services Inc.

 

The U.S. Agriculture Department in February projected that U.S. soybean end-season stocks next Aug. 31 will fall to 125 million bushels, the lowest in 27 years.

 

This week's talk of crop damage in Brazil and Argentina fed concerns that U.S. stocks might fall even further if, for example, China needs to buy more U.S. soybeans than earlier expected.

 

Talk that the U.S. may block South American soy or soymeal imports to keep out soy rust has made both speculators and farmers even more bullish.

 

"Farmers have probably sold what they're going to sell, and they're going to let the market run to where it's going to run," said Zwicker, who advises farmers on marketing plans.

 

The depleted U.S. 2003 soy crop -- down 12 percent from 2002 due to drought losses -- has also left many farmers with little remaining from the fall harvest. U.S. Dec. 1 soy stocks were 1.69 billion bushels, down 20 percent from a year earlier, with on-farm stocks at 820 million, down 30 percent.

 

There was some interest in new-crop soybean sales as cash flat prices approached $7.15 early this week. But dealers said some farmers were delaying the pricing of new-crop contracts after getting burned by surprise harvest rallies last year.

 

Many saw forward contracts booked in February 2003 as a loss after the market rallied more than $1.50 higher by harvest time. As a result, more farmers may wait until later this year for new-crop sales, regardless of the current historic highs.

 

"We could probably go up another 50 cents on new-crop beans and I'm not real sure that we're going to buy a whole lot more beans. It's almost a function of the calendar -- timing more so than price," said Greg Johnson, a grain merchandiser with The Andersons in Champaign, Illinois.

 

By contrast, corn sales have been steady at many Midwest terminals as corn futures have tracked soybeans up, with 6-1/2-year highs hit this week. Old-crop sales have been consistent with the board run-up, and new-crop corn interest picked up this week as fall prices approached $3.00.

 

"It started to pick back up again after we got into the $2.90s," Johnson said. "They'd like to have $3, but they realized everyone would like to have $3."

 

A possible rush to clean out storage bins ahead of spring planting was also not expected amid the current bullish mood.

 

Agrivisor's Zwicker thought only a sharp futures sell-off would now trigger an outbreak of grain sales.

 

"I think we've grown accustomed to 30-, 40-cent breaks in beans and 10-cent breaks in corn," he said. "If it goes deeper than that or the correction lasts for more than a day, I think that would probably get everybody's attention."