The National Soybean Index (national average cash price) posted its lowest monthly settlement in over four years at the end of October 2024.
All while demand, both exports and domestic crush, was strong through 2024-2025 Q1.
This tells us supplies were more than enough to offset demand, putting the spotlight on what could happen over the months and years to come.
The fun thing about getting older is you often get a good idea, one that gets you excited about writing your next column, then find out you wrote the piece a year ago, title and all. As I sat down to write this pre-US Thanksgiving Holiday piece my idea was to talk about US soybean supply and demand, focusing on the demand side given supply remains a mystery, generally speaking. Keep in mind actual supply is always a mystery, which is why USDA’s estimates are nothing but glamorized guesses. I’m reminded of the time I was invited to a USDA/NASS conference in St. Louis a number of years ago. Oddly enough, some of the attendees took umbrage at some of the comments I made during my presentation. Over lunch, one came up to me and said, “The estimates may be guesses, but at least they are educated guesses”. For some reason he thought that made it sound better.
For this discussion, let’s start with a look at REAL soybean market fundamentals (another word for supply and demand). Though I’m not an economist, and proud to remind folks of this fact every chance I get, I remember enough from Econ 101 back at good ol’ Fort Hays State University to know:
- Market Price is equal to the point where supply and demand lines meet, also known as Equilibrium Price
I would say I’m surprised by how many “economists” who talk about markets also know this fact but choose to ignore it to follow the rest of the lemmings over the cliff of “educated guesses”. In my analysis, I use National Cash Indexes (national average prices) to study equilibrium prices and supply and demand.
A look at the monthly close-only chart for the National Soybean Index ($CNSI) shows us a number of interesting fundamental facts. To begin with, the October settlement near $9.29 was the lowest month-end market price since August 2020 near $9.01. This told us that bottom line supply and demand, again equilibrium price, was leaning heavily toward to supply in relation to demand, the most lopsided in over 4 years. For the record the CNSI was priced near $9.32 this past Friday (November 22). If we trace this chart back a decade we see the month-end calculation for November 2014 was near $9.6650. In other words, US soybean fundamentals are more cumbersome than a decade ago. And if we add in the commercial side takes inflation into account when setting its price (I understand this is an active, and somewhat heated argument), the overall supply and demand situation looks even more bearish.
What do we know about demand through most of Q1? The latest weekly export sales and shipment update showed 2024-2025 marketing year export shipments of U.S. soybeans at 639 mb (blue column) through Thursday, November 14, a point in the marketing year when a 5-year average of 32% of what turns out to be total exports have been shipped. This pace projects total 2024-2025 exports of 1.997 bb (solid green line), up 22% from 2023-2024’s reported shipments of 1.636 bb (solid red line). The US reportedly shipped 1.918 bb during the 2022-2023 marketing year (gray dashed line). Outstanding sales were reported at 521 mb (orange column) putting total sales at 1.160 bb (combined outstanding sales and total shipments). This was up 9% from last marketing year’s total sales of 1.065 bb for the same week.
As for the main buyers of US soybeans, China and unknown destinations:
- China had 4,199,100 mt on the books
- as compared to last year’s 5,202,900 mt for the same week
- The US had shipped 10,527,000 mt to China
- as compared to last year’s 10,882,700 mt for the same week
- Unknown destinations had 5,679,600 mt on the books
- as compared to last year’s 4,645,400 mt for the same week
It’s also interesting to note a handful of other countries bought more than they did a year ago:
- Italy with 214,000 mt vs. last year’s 50,000 mt
- Spain with 231,000 mt vs. 66,000 mt
- Bangladesh with 117,000 mt, 67,700 mt
- Thailand 141,700 mt, 111,100 mt
- Egypt 400,900 mt, 122,700 mt
While others are showing a decrease:
- Mexico 1,309,600 mt, 1,558,000 mt
As for crush demand, USDA has only released its September number for the 2024-2025 marketing year, with the October figure set for unveiling on Monday, December 2. Still, US domestic crush was off to a strong start with a reported 5,595,095 tons as compared to September 2023’s reported 5,242,931 tons.
Therefore, if demand is strong yet market price is at its lowest level in 4 years, what can we assume about US supplies? Again, given what the equilibrium price is telling us we know supplies are cumbersome in relation to demand. That’s all we need to know. We’ll never have actual supply numbers to argue about, despite USDA’s monthly Supply and Demand and quarterly Stocks of Grains reports. But even without knowing the numbers, we can read the overall situation. As mentioned, we have market price through the CNSI. We also have national average basis (CNSI – nearby futures). Here we see that despite strong demand during 2024-2025 Q1 the market has been neutral to weak, as compared to its previous 5-year levels (weekly closes only), and in line with seasonal tendencies. Again, this tells us there are enough supplies to meet the stronger demand that merchandisers do not have to push the basis market.
Will global buyers remain interested in the US market beyond Q1 (September through October)? If we look at historic price distribution, the answer would likely be “yes”. The CNSI priced near $9.32 put the national average cash price in the lower 34% of its distribution range, based on weekly closes only, dating back through September 2018. (The lower-third begins at $9.25.) The general idea associated with this study is buyers get more interested near the lower 33% as a market could be viewed as undervalued. However, this study’s range could be redrawn over the coming years due to an expected increase in trade tension between the US and China. Recall before the Trade War was initiated in January 2018, the US was nearly even with Brazil when it came to global exports. During the 2023-2024 marketing year the US was estimated to have shipped only 44% of Brazil’s exports, 46.13 mmt to 104.17 mmt. Barring a weather issue in South America, I’m not expecting the situation to improve over the coming years.
