A Closer Look at Our Export Situation
Sep 25, 2023
Zack Gardner
Grain Marketing & Origination Specialist
Exactly four weeks ago (as of this writing) soybean futures hit $14.00 on the board. Since then, they have slowly tapered lower and lost about a dollar. The big driver here is that the market is losing confidence that our export program will come to fruition. Why is this?
Our soybean export sales are only at about 60 percent of where they were last year at this time. This isn’t something that we can’t recover from, but it will be difficult if we aren’t the cheapest AND if we’re dealing with logistical issues during our peak soybean exporting timeframe (September/October/November).
Problem #1 - Our first big issue is the drought in the Panama Canal. In the U.S., the first soybeans harvested are in the south. Those soybeans hit the Gulf export market and travel via ship through the Panama Canal to China. If the Canal is closed due to low water, that ship now has to travel around the tip of South America to get to the U.S. Gulf. If it is going around the tip of South America, why wouldn’t it just stop in Argentina or Brazil and save about $0.65 per bushel in ocean freight?
Problem #2 - If that ship were to bypass Brazil and head to the U.S. Gulf to load (in hopes of avoiding a 40-day waiting line to load beans Paranaguá, Brazil), they would then have to fight our Mississippi River drought issues. With drought in the Midwest most of the year, the Mississippi River has close to record low water levels for the second year in a row. Low water levels means that fewer barges can travel on the river and those that can, will likely only be partially filled so they don’t sit so low in the water. This means fewer bushels shipped and higher freight costs.
Problem #3 - If you are China, and you didn’t want to wait in line in Brazil or pay the higher freight costs to get beans from the U.S., why wouldn’t you just wait until Brazil starts harvesting new crop in February for $1.50 per bushel less?
Weren’t we bullish on soybeans just a month ago? After all, they did go to $14.00 for a reason. We have a really tight soybean balance sheet. Fewer acres and lower yields mean a tighter supply. On the last USDA report, the USDA gave us a carryout (surplus at the end of the year) of only 225 million bushels. Looking at our current export sales, we only have about 590 million bushels of soybeans sold compared to the 910 million bushels last year at this time - a difference of 320 million bushels.
So, what makes the Funds traders question their bullish stance on soybeans? We have sold 320 million bushels less than last year and our shipping pace isn’t keeping up with this year’s 590 million bushels, so how many bushels does the USDA take away from our export number in the next report? 50 million? 100 million? 150 million? If I’m a Funds trader, I’m going to take my profit and sell out of this market while everyone else debates how much demand the USDA will take out of the next report.
Grain Marketing & Origination Specialist
Exactly four weeks ago (as of this writing) soybean futures hit $14.00 on the board. Since then, they have slowly tapered lower and lost about a dollar. The big driver here is that the market is losing confidence that our export program will come to fruition. Why is this?
Our soybean export sales are only at about 60 percent of where they were last year at this time. This isn’t something that we can’t recover from, but it will be difficult if we aren’t the cheapest AND if we’re dealing with logistical issues during our peak soybean exporting timeframe (September/October/November).
Problem #1 - Our first big issue is the drought in the Panama Canal. In the U.S., the first soybeans harvested are in the south. Those soybeans hit the Gulf export market and travel via ship through the Panama Canal to China. If the Canal is closed due to low water, that ship now has to travel around the tip of South America to get to the U.S. Gulf. If it is going around the tip of South America, why wouldn’t it just stop in Argentina or Brazil and save about $0.65 per bushel in ocean freight?
Problem #2 - If that ship were to bypass Brazil and head to the U.S. Gulf to load (in hopes of avoiding a 40-day waiting line to load beans Paranaguá, Brazil), they would then have to fight our Mississippi River drought issues. With drought in the Midwest most of the year, the Mississippi River has close to record low water levels for the second year in a row. Low water levels means that fewer barges can travel on the river and those that can, will likely only be partially filled so they don’t sit so low in the water. This means fewer bushels shipped and higher freight costs.
Problem #3 - If you are China, and you didn’t want to wait in line in Brazil or pay the higher freight costs to get beans from the U.S., why wouldn’t you just wait until Brazil starts harvesting new crop in February for $1.50 per bushel less?
Weren’t we bullish on soybeans just a month ago? After all, they did go to $14.00 for a reason. We have a really tight soybean balance sheet. Fewer acres and lower yields mean a tighter supply. On the last USDA report, the USDA gave us a carryout (surplus at the end of the year) of only 225 million bushels. Looking at our current export sales, we only have about 590 million bushels of soybeans sold compared to the 910 million bushels last year at this time - a difference of 320 million bushels.
So, what makes the Funds traders question their bullish stance on soybeans? We have sold 320 million bushels less than last year and our shipping pace isn’t keeping up with this year’s 590 million bushels, so how many bushels does the USDA take away from our export number in the next report? 50 million? 100 million? 150 million? If I’m a Funds trader, I’m going to take my profit and sell out of this market while everyone else debates how much demand the USDA will take out of the next report.