Soybean Cash Premiums Widen as Price Slump Slows Farmer Sales

By Jeff Wilson

Dec. 11 (Bloomberg) -- Cash premiums for soybeans delivered to export terminals near New Orleans widened against Chicago futures yesterday after a three-day drop in prices slowed sales by growers, tightening available supplies.

The so-called spot-basis bid, or premium, for soybeans delivered this month was 44 cents to 50 cents a bushel above January futures on the Chicago Board of Trade, compared with 40 cents to 50 cents on Dec. 9, government data show. The basis a year earlier was 65 cents to 82 cents over January futures.

“The bean basis is pretty weak right now, but it will begin to firm by the end of December and in early January” to get farmers to sell, said Scott Stoller, a grain merchandiser for Michlig Agricenter Inc. in Manlius, Illinois. A combination of lower prices and the snowstorm that’s blanketing the Midwest has halted grower selling, he said.

Soybean futures for January delivery declined 1.5 cents, or 0.1 percent, to $10.27 a bushel on the CBOT yesterday, bringing the three-day drop to 2.5 percent. Prices have slipped 3.2 percent this month.

Increased overseas purchases of U.S. soybeans and animal feed produced from the oilseed may also start to firm prices, Stoller said.

Increased Export Sales

U.S. exporters sold 927,700 metric tons of soybeans during the week ended Dec. 3, up 41 percent from a week earlier, the Department of Agriculture said yesterday.

Cumulative sales for the marketing year that began Sept. 1 are up 56 percent from a year ago at 28.6 million tons. That’s about 78 percent of the USDA’s forecast for the entire year of 36.5 million tons. The average figure for the previous five years has been 56 percent.

Export shipments of soybean meal, an animal feed, were 297,200 tons last week, up 30 percent from the prior four-week average, USDA data show. Sales since the marketing year began on Oct. 1 totaled 5.101 million tons, up 79 percent from the same period a year earlier.

U.S. soybean and animal-feed exports have surged after drought cut output earlier this year in Brazil and Argentina, the two biggest growers and exporters of the oilseed after the U.S.

Soybean production in the two countries next year will jump 30 percent to a record 116 million metric tons, according to the USDA.

Lower Cash Prices

The average U.S. cash soybean price fell to $9.7667 a bushel yesterday, from $10.0464 at the end of November, the highest since the harvest began in early September, data from the Minneapolis Grain Exchange show.

“Processors and exporters bought a lot beans two weeks ago and will need to get more inventory by late this month,” Michlig’s Stoller said. “We have not taken in any soybeans stored in farmers’ bins for two weeks.”

Falling barge freight costs may begin to boost cash bids for soybeans by the end of December and in January, as buyers can pay more for the oilseed, Stoller said.

The cost to move grain and soybeans by barge from Chicago to New Orleans on Dec. 9 was $22.54 for 2,000 pounds, down 2.5 percent from $23.12 week earlier and down from a one-year high of $37.57 on Nov. 11, USDA data show.

Long Barge Season

The last towing barges to ply the northern section of the Mississippi River in 2009 left Minneapolis on Dec. 2, bringing an end to the longest towing season on the waterway in five years, according to the Minnesota Department of Transportation. A late harvest helped prolong the navigation season, the USDA said yesterday in a report. Barges leave the northern portion of the river to avoid being trapped in ice.

The average cost for shipping soybeans from Minneapolis through Gulf ports to Japan increased 9.6 percent to $88.99 per metric ton in the third quarter, from $81.16 in the second quarter, the USDA said in a report. Ocean rates increased about 18 percent, accounting for 64 percent of total transportation costs. Shipping costs were down 45 percent from $160.67 a year earlier.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.