CHICAGO (Reuters) — U.S. soybean processors who ran through their supply of soybeans during the winter to meet surging Chinese demand for soymeal are scrambling to find supplies to fill domestic commitments as prices to continue to rise.
Tight supplies have left crushers at risk of being unable to fill previously booked orders even though incremental demand is waning.
“In the eastern and central Corn Belt, processors are not covered in beans to the level they need to be, given their end-user orders,” said Mike Zuzolo, president of Global Commodity Analytics & Consulting. “The end-users are covered to July for most of their meal needs, but the processor is not covered for much more than 30 days.”
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Processors will likely face thinning profit margins as they struggle to meet the demand from the end users who locked in prices months ago.
Farmers, already reluctant to let go of what they have left in their storage bins, have been busy with planting and soybean movement has slowed to a trickle.
“Everyone is concerned that they are not going to be able to buy beans,” a soymeal dealer in Minnesota said.
On the cash market, the soybean basis has risen by between 15 and 20 cents during the past few weeks at processors across Indiana, Iowa and Illinois, resulting in prices close to $16 a bushel in some places.
Tight stocks are likely to keep prices elevated even though the U.S. Department of Agriculture cut its estimate of domestic soymeal use for the 2013-14 crop year by one million tons since its forecast in May 2013, including a 200,000 ton cut to 29.2 million tons in its most recent supply and demand report.
The USDA has pegged 2013-14 U.S. ending stocks of soybeans at a scant 130 million bushels, which would be the smallest in 10 years.
Soybean futures rallied to fresh contract highs on Thursday, with the benchmark July contract surging to $15.36-3/4 a bushel after U.S. export data showed that demand from overseas buyers remained robust.
U.S. exporters have shipped a record 27.5 million tonnes of soybeans to China so far this marketing year.
Soymeal futures also hit new contract highs, rallying through the $500 a ton level even as hog producers, major buyers for soymeal, have cut back their orders because herds have been reduced by the highly contagious porcine epidemic diarrhea virus. In less than a year, PEDv has wiped out more than 10 percent of the pig population in the United States and helped send retail pork prices to record highs.
