The soy complex issue
Here is a thought/opinion from an acquaintance of mine....
"I believe there are 3 tiers of soybean demand. Tier 1 is livestock. This demand is elastic because people have to make money feeding it.
Tier 2 is human consumption. This demand is completely inelastic because it doesn't make a fig of difference how much they cost. A human can survive on 3 bushels of beans and nothing else for an entire year so $100/ bushel isn't gonna drop many from that bidding war.
Tier 3 is seed for the next year. Even less elastic than Tier 2. These are the first bushels harvested. Tier 2 fights over what is left after tier 3 gets all they want and Tier 1 gets the beans Tier 2 don't need.
Soybeans are a sorry joke in a drought. If a guy has a 30% yield loss on his corn, you can bet it was all of that and then some on soybeans most of the time. Sure, "August makes beans", well, August wasn't friendly and June and July were downright hostile. When it's all over we will harvest a 2 billion bushel bean crop. For starters the 7 million acres of double crop beans won't get their seed back.
So, the first bushels go for seed to planting the 2013 bean crop, which will be the most acres ever BY FAR. Then the Asians get their 1.3 billion bushels. This leaves a half billion bushels for domestic crush. The normal domestic crush is 1.7 billion bushels. DDGS is a half billion bushel of beans worth.
So, back to the soybean oil..... 100% of that is for human consumption and it doesn't make a fig of difference if it costs $100/ gallon. A few oz treats all kinds of popcorn. We are going to observe a 70% drop in USA soybean oil supply. This demand is completely inelastic because it's cost is perfectly irrelevant. "
"It's starting to look like a lot of farmers believe that a 25% drop in USA soybean supply means a corresponding 25% drop in soybean meal for livestock feed? If that's what people think they are wrong.
The slice of the soybean pie going to seed doesn't change when the pie itself changes. No matter what that slice is exactly the same. (except maybe for seed size variance)
The slice of the soybean pie going to soy burger, soy milk, vegetable oil, soy nuts, tofu, etc does not change regardless of what the soybean pie (crop) does.
Because the above 2 slices of the soybean pie are static, the only slice to adjust with crop size is the livestock consumption. Hence a 25% drop in American soybean supply comes to at least a 50% to maybe 60% drop in livestock soy demand. It's leveraged to livestock demand because livestock is the "Swing Consumer" of soybeans. They get the beans that are left over when everybody else gets all they want.
Tofu consumption will never drop if we went year after year after year of global soybean crop shortfalls.
If August would have been as brutal as July, we would have gone DEEP past Tier 1 demand and dug way into tier 2 soy demand. It's weird that people don't even realize how close we came to, "Here's to wars and revolutions, bucking horses and prostitution". Goat leggings all around, that's where we'd be and still might. Keep in mind that the last time there was a total export ban on any grain in America was 1973 under Nixon with soybeans and over 1 million Bangledesh died as a direct result."
Re: The soy complex issue
Exports are elastic as long as the world has wheat......that segement is going to get interesting as world course grain supplies dwindle.....
Ethanol has proved to be inelastic........grind baby grind.......
Residual feed etc has proved to be somewhat inelastic with some replacement.....
Its odd, but I think US corn is too expensive for the rest of the world.......yet our supply is so low all we need is domestic demand which is sustaining for now.........
So the real kicker is when crop goes sub 10.......that means zero exports and trimming some domestic use.........does that come in the form of reduced ethanol or residual/feed.......and what's the world demand and supply of course grains look like if NA corn is basically off line.....
Re: The soy complex issue
Hobby...making lots of ill-advised assumptions there Hobby. IF beans were still trading at $12 you might have a point, they are not.
August weather for much of the bean belt has been pretty good actually. The odds of a bearish Sept bean report are well above 50:50. jmo Pull up the last 30 days reainfall accum maps, it is not the same map as it was for corn in July. Not even close.The states with lots of DC beans have had pretty good rains in August. Not wise to assume they will be bad. Much like corn though, the first yield reports will be the worst of the year, remember that when managing your price risk.
Re: The soy complex issue
This was not my thought piece.
I do how ever think there will be a lot of less than expected yields in the bean fields this year. I have looked under the canopy in several widely scattered areas in Iowa and saw lots of 30 something beans on 60 something ground. many are podded high and many got hit harder with the heat than you think. Many two bean pods in what I have looked at.
The beans here in Iowa are "yellowing" at an alarming rate and have done all that they are going to do. . . I have lots of waist high beans with 30 something for a pod count, some taller than that. They should roll up lots of bales for the spring mud for the calves to lay on