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Monday night has become soybean night

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Monday nights look like being soybean nights.

OK, not this week, with the US independence day holiday causing delays to some official reports.

But for normal weeks, Monday crop health reports from the US Department of Agriculture look like taking on particular importance for soybeans, following data showing that American farmers have sown surprisingly low levels of the oilseed.

If the acres aren't there, it is on good yields that buyers must rely to lift supplies.

Tight supplies

After all, last week's surprise US data on crop sowings and stocks, while unveiling plenty of extra corn, left soybean supplies looking even more snug.

Last week's 1.4m-acre cut to USDA estimates for soybean sowings this spring equates to some 60m bushels less production at an average yield. And, in fact, the loss may be bigger, given that the area lost has been focused in states such as Nebraska, Illinois and Iowa which are among the most productive.

That swamps the boost to supplies from extra soybeans left over from last year's harvest. (US stocks were, as of a month ago, some 23m bushels larger than had been thought.)

Indeed, it is not difficult to get to a stocks-to-use ratio – a key metric for the availability of crop supplies and therefore of their pricing potential – to match the 4.5% or so which represents, in essence, the lowest that the market can get to.

That kind of level has been reached in a number of recent seasons, notably in 1972-73, 2003-04 and 2008-09, kicking off strong rises in prices each time to keep consumption under control.

Every bushel counts

The best hope for buyers this time, now that soybeans have lost the acreage war, would be (bar a blow-up in a major consumer such as China) for the oilseed to win favourable growing conditions.

A one bushel-per-acre rise in yield, after all, would add more than 40m bushels to stocks. And that's equivalent to an inventory rise of more than one-quarter, working through last week's acreage and inventory statistics at face value.

Conversely, of course, a one bushel-per-acre fall signals sharply tighter supplies, which would likely force a big rise in prices to ration demand.

Summer challenge

Which is why condition data will be particularly crucial to soybean prices.

So far, the data is looking OK for buyers, with 65% of the crop rated in "good" or "excellent" condition. But that's no cause for comfort given the length of the growing season still ahead.

The figure was 70% at this time in 2003, only to crumble below 40% in the autumn, when the crop turned in a yield of 33.9 bushels per acre. That is nearly 10 bushels per acre below what is being forecast for 2011.

Expect every percentage point to make a difference in soybean market sentiment this year until whatever is harvested is safely in the silo.


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