Soybean Cash Premiums Narrow as Farmer Sales Replenish Supply

April 20 (Bloomberg) -- Cash bids for soybeans at export terminals near New Orleans narrowed their premiums relative to futures on the Chicago Board of Trade as U.S. farmers increased sales to take advantage of the highest prices in six months.

The so-called spot-basis bid, or premium, for soybeans moved by barge to New Orleans was 36 cents to 47 cents a bushel above the price of May CBOT futures, compared with 43 cents to 47 cents on April 17, U.S. Department of Agriculture data show. The premium for delivery next month fell to 42 cents to 52 cents from 49 cents to 52 cents. The average basis for spot delivery this month has fallen 20 percent to a six-month low today.

“After an active week of farmer selling, it appears that nearby needs have been filled,” said Tim Abel, a commodity risk consultant for Mid-Co Commodities Inc. in Bloomington, Illinois.

The average cash price in the Midwest on April 17 rose to $10.15 a bushel, topping $10 for the first time since September, Minneapolis Grain Exchange data show. Cash soybeans in Chicago fell for a second straight session after reaching $10.51 on April 16, the highest since Sept. 26.

The number of bushels inspected for export fell 34 percent to 15.671 million bushels in the week ended April 16, and was down 26 percent from a year earlier, the USDA said today in a report. Total inspections were the smallest since October, USDA data show.

May-July Spread

The premium of May futures to the July contract fell to 7.5 cents compared with the April 17 premium of 10.25 cents, the highest this marketing year, data from the CBOT show.

“The narrowing in the May-July spread is an indication that the export markets may have enough beans to meet demand,” Abel said. “The demand may improve the next few weeks as farmers focus on planting crops,” rather than selling inventories left from last year’s harvest, Abel said.

Soybeans futures for May delivery dropped 32.5 cents, or 3.1 percent, to $10.285 a bushel on the CBOT. On April 17, the contract reached $10.73, the highest since Oct. 2. Last week, the price gained 4.4 percent, the third straight gain.

Futures climbed last week as China, the biggest global buyer, increased purchases of U.S. supplies and crop-production forecasts were reduced in Argentina, the third-largest exporter behind the U.S. and Brazil.

The USDA said today that 110,000 tons of soybeans were sold to China for delivery before the end of the marketing year on Aug. 31 and an additional 120,000 tons were sold for delivery after Sept. 1. On April 17, the government said that 275,000 metric tons were sold to unknown destinations.

Post-Harvest Spread

The May futures premium relative to soybeans for delivery in November, after the harvest, fell to $1.1525 a bushel, down for a second straight session. The spread reached $1.17 on April 16, the widest this season, after the government said April 9 that U.S. reserve inventories on Aug. 31 will fall to a five- year low of 165 million bushels, down from 205 million a year earlier.

“The inability to hold near six-month highs amid new Chinese buying was a negative signal,” Abel said. “It’s still a very tight supply situation and if China continues to buy U.S. soybeans, then prices could pop right back.”