USDA WASDE Reaction - 06/11/2020 | Blog
Teucrium | June 11, 2020
What to Watch: The Weather and China
There were not any fireworks in today’s WASDE, however one thing is clear: the Chinese need soybeans. The report shows that China is expected to take almost all the world’s soybean surplus with the USDA estimating annual Chinese soybean import demand growth of over 5.5%. This appears to be filtering through to the US soybean balance sheet with the USDA increasing its soybean crush estimates by 15 million bushels (soybeans are crushed to make meal which is used to feed livestock).
The increased crush estimates are reducing the 20/21 carryout by 10 million bushels to 395 million.
The math works out to produce a soybean estimated stocks-to-use ratio* of 9.1% as low as it’s been in the last three years. This assumes that the weather will cooperate as weather risks remain with the bulk of the growing season is still ahead of us.
It is likely that soybean market participants will be keeping one eye on Chinese buying, and the other on the weather. Both could lead to increased market volatility over the next few months.
*Stocks to use is calculated by taking the ending stock figure and dividing by the total use (395 million bushels /4,330 million bushels). .