U.S. serves strong soybean exports, checks supplies
Strong soybean demand and hurricane-related ethanol usage have supported grain markets over the past month but the September Grain Stocks report could still bring new volatility to corn and soybean markets.
“The stocks reports always have the possibility for big volatility,” said Joe Vaclavik, president of Standard Grain.
Vaclavik said this tendency toward market moves following the report stems from the challenge of monitoring some aspects of the report, including feed usage. While exports and ethanol can be tracked with weekly updates, the quarterly stocks reports may contain more surprises, he said.
On the soybean side, changes in residual use are not uncommon, Vaclavik said.
“The thing to remember about this report is it’s an old crop report. It’s all bushels on the balance sheet.”
Joe Lardy, research manager of CHS Hedging said, “I’m prepared for the market to move.”
Heading into the report, soybean demand has been supported by a strong seasonal increase in exports, Lardy said.
This seasonal “front-loaded” trend for soybean exports is reflected by a sharp curve in the five-year average export pace, as export activity shifts to the U.S. from South American growers this time of year, often increasing rapidly by November, he said.
Lardy described the seasonal export pattern as being like as a tennis match between U.S. and South American growers.
The soybean export “ball” is now in the U.S. side of the court. “We get our hit for six months,” Lardy said.
In corn, the EPA waiver to allow blending of E15 ethanol after Hurricane Harvey disrupted Gulf oil supplies was a short-term boost for the market, Lardy said.
Recent heat across the Midwest has reduced fears of an early frost or freeze, limiting possible damages to the new crop before harvest is completed. “Frankly, harvest reports have been surprisingly good,” Lardy said.
Vaclavik said, given high USDA expectations for soybean demand, it will be important to maintain steady export sales to stay on pace. Many variables, including the South American crop, currencies and soybean demand, will all be at play.