Soybean Overview1. United States Cash Market and Grain Flow

2. South American Logistics and Costs

3. Relationship between CBOT Futures and Basis

4. Soybean Supply and Demand Situation and Market Outlook

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1.United States Cash Market and Grain FlowUS Trends• Slow trains and rail congestion because of oil

production• More grain being shipped by barge and

container• Soybean shipments becoming more seasonal• More exports through Gulf

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Soybean Basis • Basis in North and West is weaker

• Higher transportation costs to export market

• Issues with rail delays and rail car availability

• Higher basis on Mississippi River• Gulf basis nearly $1/bushel on

export demand

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Soybean CIF Basis Gulf (New Orleans)• Gulf basis made new

record in August• Gulf prices rallied so that

Brazil imports would be profitable

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Shipping Cost to Gulf• US barge rates normally quoted as

percentage of tariff

• Original tariff from St Louis to Gulf was $3.99/ton

• Current quote is 337.5% of tariff = $13.47/ton

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Delivery Locations for CME Contracts

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Delivery Locations for CME Soybeans• Delivery locations for

corn and soybeans are on Illinois River

• Illinois Rivers connects with Mississippi River and to the Gulf

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US Soybean Exports• This year had new record of 3.3 million

tons of soybeans shipped in 1 week (November 14, 2014)

• 8 weeks over 2 million tons shipped

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US Soybean Exports by Port

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US Soybean Exports by Port• New weekly record for

weekly shipments off Mississippi River

• Interior shipments (containers and trains) remain strong

• Columbia River (PNW) not exporting more than previous years

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Grain Barges Unloaded in Gulf

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Slow Rail Speeds• Time trains spend in terminals or hubs has

increased substantially compared to last year

• For some locations and railroad companies time has doubled

• Norfolk South waiting 60 hours in Columbus, Ohio

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Slow Rail Speeds• Train speed has decreased as more oil is being shipped

• Grain train average speed was about 25.5 miles per hour last year (39.6 kilometers per hour)

• Currently some are below 22 miles per hour (35.4 kilometers per hour)

• Many grain companies complaining trains and rail cars are several weeks or months behind schedule

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Container Exports to China

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US Soybean Export to China – Container and Vessel

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2. South American Logistics• Exports increasing• Improved shipping logistics• Interior transportation costs remain high

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Trucking cost USD/ton from Mato Grosso• 2013 trucking cost from Mato

Grosso to Santos was $103/ton

• Trying to improve BR-163 road and ship more soybeans through port in the North

• Most soybeans still going South to Santos/Paranagua/Sao Francisco and trucking costs are high

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Brazil Soybean Exports by Port

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Brazil Soybean Exports by Port• Brazil exports have

doubled in the past decade

• Currently estimated to export 46 million tons

• Smaller ports are exporting a greater share of the total

• Smaller percentage of soybeans are leaving through Paranagua

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Brazil Soybean Exports by Port (% of Total)2003 2009 2014

Santos 28.9% 30.4% 27.9%

Rio Grande 18.9% 16.3% 17.7%

Paranagua 29.1% 16.9% 16.5%

Sao Francisco do Sul 4.3% 7.4% 10.8%

Vitoria 8.4% 9.8% 6.9%

Sao Luis 4.5% 6.1% 6.8%

Salvador 0.0% 3.9% 4.4%

Manaus 4.0% 5.3% 3.1%

Barcarena 0.0% 0.0% 2.4%

Santarem 1.5% 3.3% 1.9%

Imbituba 0.0% 0.0% 1.0%

Ilheus 0.2% 0.5% 0.4%

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Waiting Time - Paranagua• In 2013 Paranagua had delays of over

70 days to load vessels

• 2014 delays were still large, but lower than 2013

• Paranagua switched to only exporting soybeans (no corn) during the busy season and improved truck queues

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Waiting Time - Santos• Santos delays were still large, but

decreased from 2013

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Argentine Soybean Vessel Lineup• China is the main buyer

Argentine soybeans

• Argentine farmers continue to hold soybeans

• Argentine government trying to have farmers sell soybeans

• Taxes favor exports of soybean mea

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Argentine Soybeans to China by Port• Most Chinese soybeans

loaded in Bahia Blanca and Necochea in Southern Argentina

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3. Relationship between CBOT and Basis

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Current Brazil Prices• Prices in Mato Grosso are

usually at a large discount to Southern prices because of transportation costs

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Soybean Prices (USD/bushel)• Over longer time period CBOT

futures correlate with Brazilian interior prices and FOB prices in Paranagua

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Brazil Basis (USD/Bushel)• In recent years prices have differed by

large amount

• Seasonal changes in basis have become bigger

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Brazil Basis (USD/Bushel)

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Brazil Interior Relationship to Futures • Long term relationship between Brazil

interior prices and CBOT

• Some years have higher correlations

• Recent years have had worse relationships between prices

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Brazil Interior Relationship to Futures • Past 3 years relationship between

CBOT and Brazil prices is weaker

• 2013 saw large divergence when CBOT futures rallied on low US stocks

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Paranagua Relationship to Futures • Export prices have followed

more closely to CBOT compared to Brazil interior prices

• 2013 also had wide changes in correlation

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Brazil Exports to the United States• US imported 1.047 million tons of soybeans from

Brazil in 2014

• June imports from Brazil were 495,238 tons

• United States was the 5th largest destination for Brazilian soybeans in 2014

• Brazil Exports (million tons)(January-November 2014)• China 32.60• Spain 2.12• Netherland 2.00• Thailand 1.24• United States 1.06

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4. Supply and Demand

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Slow Sales in Brazil• Farmer sales were

slow because of low prices

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Brazil Currency Weakness• Brazil currency weak

• Drop in oil prices contributing to currency weakness

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Mato Grosso Soybeans in BRL and USD• In US dollar terms soybean prices

in Mato Grosso have been steady

• In Brazilian Real terms prices have increased making farmers more willing to sell

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Soybean Planting Pace• Brazil soybean planting was slow

• Planting is now near historical pace

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South American Production

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Argentine Currency• Farmers have incentive to store grain

with high inflation and unofficial exchange rate lower

• Farmers sell at official rate which is stronger than market rate. Concern that after they sell soybeans for pesos that government will devalue

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Argentine FX Reserves• Argentine foreign currency reserves

have been decreasing since 2011

• Argentine governments wants farmers to sell to bring in foreign currency and tax revenue

• Banks not lending to farmers storing soybeans

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Soybean Crushing

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Soybean Exports• Brazil and United States

competing to be largest exporter

• Uruguay and Paraguay have increased

• Argentina exports are low because government wants soybeans crushed in Argentina before export

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Soybean Ending Stocks• Argentine farmers holding

soybeans but may sell more

• Brazil has large stocks

• US returning to normal stocks level after very low stocks last year

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Soybean Imports• A perspective on Chinese

imports

• EU growth limited

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Key Points• US exports of soybeans and soybean meal is high• US ending stocks at highest levels in years, should reduce difference between CBOT futures and

global prices• Currency weakness in exporting countries should increase farmer sales• Brazil logistics are poor relative to the US, however ports logistics have improved• Argentina should see increased selling of soybeans by farmers

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EndContact: darin@agtradertalk.com

Website: www.agtradertalk.com

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