The conflict between Argentina and its farm organizations, over the government's desire to implement a sliding scale export tariff on soybeans and its products, has been the soybean market's main focus during the last few months. The two sides are negotiating to prevent a second producer marketing slowdown if talks break down this week. However, today's May monthly update from the U.S. Department of Agriculture (USDA) will indicate domestic and world supply/demand for soybeans, as well as the first official supply/demand projections for the U.S. 2008/09 soybean crop. This should prompt some attention on the tight U.S. old-crop supplies and the substantial jump in 2008 output, based upon U.S. producers' intentions to expand plantings by 18% this year.
Soybean seedings are lagging this year, due to the abnormally wet spring in the central U.S.-which has led producers to concentrate on getting corn in the ground first. Thus U.S. soybean plantings are just 5% vs. the 2003-2007 pace of 14% for early May. With another month before plantings become late, soybeans' seeding pace won't become a market factor for another couple of weeks.
Argentina's marketing uncertainties and the ongoing weak dollar have helped keep U.S. export sales stronger than normal for this time of year during the South American harvest, suggesting that Friday's export sales could be raised another 10 million -15 million bu. this month. However, the U.S. crush didn't have a strong March processing month, dropping it 12 million - 17 million bu. behind its 2003-2007 seasonal pace. This suggests that soybean's old-crop stocks of 160 million probably will be left unchanged this month. With Brazil's harvest nearing completion, reports of good yields suggest this year's output could be 62 mmt, up 1 mmt from the USDA's current estimate. However, recent reports that Argentina's second-crop beans after wheat have been a bit disappointing suggest that the USDA will leave its projection unchanged at 47 mmt this month.
The USDA also will release its first official U.S. 2008/09 soybean supply/demand forecast today. Similar to corn, the USDA normally uses its annual Ag Forum yield and demand projections for this report. However, the 70 million bu. jump in old-crop soybean exports since these calculations were made in February suggest the USDA probably will boost its initial overseas demand for the coming year by 50 million (to 960 million) on this report. After this year's extremely tight residual level, it also could decrease this amount for 2008/09, resulting in a 290 million ending stocks projection. Given the possibility of some additional plantings resulting from delayed corn and other crops from this spring's wet planting season, the trade will consider this carryover to be very adequate. The USDA also will project a world oilseed production level, but no foreign soybean output or world supply/demand balance sheet for 2008/09 is released until June each year.
Argentine conflicts may provide support at times for soybeans, but build concerns about even more 2008 plantings than the current 18% intentions-because this year's corn planting delays may weigh on prices. Thus, producers should complete old-crop sales and have 45%-50% of 2008/09 output sold or hedged at this time.
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