March 30, 2009
US soy planting seen rising, solid Q2 usage
The US Department of Agriculture is expected to show an increase in soy seedings from 2008, with soybean stocks as of March 1 projected to reveal solid second quarter usage in its reports scheduled for release Tuesday 8:30 a.m. EDT (12:30 GMT).
Analyst surveyed by Dow Jones Newswires estimate soy acreage at 79.251 million acres, up 3.533 million acres from 2008 seeded acreage of 75.718 million. The estimates from the 17 analysts surveyed ranged between 75.900 million and 81.500 million acres.
USDA is expected to report soy stocks at 1.322 billion bushels in its quarterly Grain Stocks report.
The average of guesses by analysts surveyed by Dow Jones Newswires estimate soy usage in the second quarter of the 2008-09 marketing year to come in around 954 million bushels, bringing stocks down to 1.322 billion bushels. Estimates ranged from 1.295 billion-1.353 billion. Stocks as of Dec. 1 totalled 2.276 billion.
"After last year's dramatic meltdown in Ag prices, energy-based increases for corn crop inputs and disappointing soy crops in both the US and South America this winter tightening supplies, higher soy plantings are expected," said Jerry Gidel, analyst with North America Risk Management in a market report.
Concerns about the high costs of corn inputs - nitrogen, fertilizer - and producer disappointment over yield results from corn-on-corn seedings is another factor expected to lend support to soy plantings.
"There are a lot of flexible acres that could shift between corn and soy this year, but based off insurance rates set in February at US$4.40 a bushel for corn and $8.80 for soy, that ratio looks attractive for soy, said Don Roose, president of US Commodities in West Des Moines, Iowa.
Tight projected old crop US soy ending stocks and solid export demand from China have many industry analysts thinking that soy will capture acres in 2009, but sluggish domestic demand and reduced input costs for corn in 2009 are altering some planting thoughts, analysts said.
The wild card remains the farmers who decided to hold off pre-buying fertilizer and kept their options open, as their break-even points on planting corn have been affected greatly by the drop in input costs.
Corn is more economically attractive to farmers that did not buy anhydrous in the fall, with fertilizer prices dropping from the US$900 to US$1,100 range in the fall to US$350 to US$450 heading into the spring, a cash broker said.
Based on a farmer survey conducted by Risk Management Commodities Inc., 82 percent of farmer respondents plan on not changing their crop rotations or look for higher corn acres. Nearly 80 percent of this 82 percent had booked nitrogen - or part of it - last fall, RMC senior analyst Mike Zuzolo said.
Heading into a year of crop rotation, the price ratio between corn and soy would need to aggressively move to levels that would break seeding patterns, particularly with farmers booking fertilizer last fall, Zuzolo said.
Crop rotation is the practice of growing a different crop each year on the same land to not drain nutrients from their soils particularly after planting corn on acres in consecutive years, and by changing the crop environment it helps fight pests as well, analysts said.
March 1 stocks are expected to confirm analyst expectations of solid second quarter usage. USDA's quarterly grain stocks report is seen as an important checkpoint for gauging prospective year-end stocks of soy, analysts said.
The stocks report is not expected to generate any major surprises, with residual use the unknown variable that traders will focus on.
Poor margins for the livestock industry, with high feed prices causing several livestock operations to cut back on animal herds in 2008 and no near-term recovery of that lost demand is expected. As a result, the US crush pace has limped along amid sluggish domestic protein demand.
However, "China's crushers remained strong buyers of US supplies this past winter, leading the USDA to boost this year's export demand by 135 million bushels since December, as this year's first half overseas purchases pushed to over 1 billion bushels by March 1 - a new record - and shipments remain 10-15 million bushels ahead of their seasonal pace," Gidel said in a market note.
"We know what the crush was and we know what exports were in the quarter, which leaves the question of residual for the USDA to answer for any unexplained stock levels," a cash broker said.
US Commodities' Roose anticipates March 1 stocks will drop to 1.295 billion bushels, the lowest of the 17 analysts surveyed by Dow Jones Newswires. Due to a lot of uncertainty with prior crops and stocks, the USDA will continue to adjust its residual figure to make its balance sheets match up with actual stocks on hand, Roose said.
"With 2008-09's overall first half demand similar to last year, we are expecting soybean's March 1 stocks at 1.31 billion bushels if this year's seasonal residual - seed beans leaving commercial channels - returns its recent 160-180 million bushel range for the first six months of the crop year," Gidel said in a market note.