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Perspective: Mid-Day Commentary for May 9

By: Arlan Suderman, Chief Commodities Economist

Perspective: Mid-Day Commentary
 
Arlan Suderman
Chief Commodities Economist

 

May 9 - Trade talk optimism waned in today's early trading hours, with stocks slipping back into the red ahead of the weekend, although investors will be monitoring the headlines closely through the weekend. The VIX is trading near 22 at this hour, after slipping to its lowest level since April 2nd earlier in the session. The dollar index is trading near 100.1. Yields on 10-year Treasuries are trading near 4.36%, while yields on 2-year Treasuries are trading near 3.85%. Crude oil prices are 1% higher on renewed demand optimism, while the grain and oilseed sector is mixed, with corn and soybean prices firming on hopes of an RVO announcement from the EPA, while wheat prices slip on recent rains.

USDA will release its first comprehensive domestic and global supply and demand balance sheets for the 2025-26 marketing year in its WASDE crop report on Monday. Look for it to project planted soybean acres at 83.5 million, based on its March 31 planting intention survey results, while pegging this year's yield at 52.5 bushels per acre, matching what it projected at its Ag Forum in February. That should produce a 4.3 billion-bushel crop this year if all verifies as projected.

But the demand numbers should draw most of the attention. USDA projected 2025-26 soybean exports at 1.865 billion bushels at the Outlook Forum in February, up from its projection of 1.825 billion bushels for the current marketing year. I do not see any path to such strong exports in the coming year, short of a major trade agreement with China that forces it to buy more soybeans, based on the size of this year's South American crop. Brazil boasted a record soybean crop this year, with Argentina seeing yields coming in better than expected at harvest as well. From a pure balance sheet perspective, I put U.S. exports at just 1.650 billion bushels for the upcoming marketing year, as China continues to garner more of its needs from cheaper South American supplies, unless a trade agreement forces them to pay up for more expensive U.S. soybeans.

The next question will focus on domestic crush. USDA's current year crush estimate of 2.420 billion bushels is too high under current conditions, but that could quickly change if we soon hear from the EPA regarding its new RVO requirement for biomass diesel production. We do expect that announcement soon, and we expect it to be considerably higher than the current 3.35 billion gallon requirement - possibly approaching 5 billion gallons. Regardless, I'm anticipating that announcement to support domestic crush at 2.530 billion bushels for the 2025-26 marketing year, putting ending stocks at an adequate level of 391 million bushels. There's nothing bullish about that, but it does leave the door open for a weather scare, should one develop this summer, as shown in Alt. #1 below.

 

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