Soybean Cash Premiums Widen as Price Drop Stalls Farm Sales

June 5 (Bloomberg) -- The premium for soybeans at export terminals near New Orleans widened relative to Chicago Board of Trade futures, as a drop in prices discouraged U.S. farmers from selling supplies from last year’s harvest.

The so-called spot-basis cash bid, or premium, for soybeans moved by barge this month to ports along the Gulf of Mexico was 60 cents a bushel above July futures, the U.S. Department of Agriculture said. That was up from 57 cents to 61 cents yesterday, USDA data show. Before today, the average premium fell 19 percent since reaching a three-month high of 73 cents on May 20, the USDA said.

“Farmer selling was sporadic and mostly light because farmers just don’t have many left to sell,” said Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa. “Farmers are metering out what remaining supplies they have and are mostly down to gambling stocks for any weather rallies this summer.”

Soybean futures for July delivery fell 4.5 cents, or 0.4 percent, to $12.255 a bushel in Chicago. Still, the price rose 3.5 percent for the week, capping a sixth-straight weekly gain. Earlier, the most-active contract rose to $12.365, the highest since Sept. 4.

Futures rose this week on increased investor demand for commodities as a hedge against inflation as global economies recover, reducing U.S. inventories to the smallest ever, Roose said.

Shrinking Inventories

U.S. soybean inventories on Aug. 31, before the harvest, will drop to 130 million bushels, or 4.3 percent of estimated annual usage, down from 205 million a year earlier, the USDA said May 12. The government on June 10 will update its stockpile estimate, which Roose expects to fall closer to 110 million bushels.

Total sale commitments by U.S. exporters for delivery before the end of August are up 12 percent to almost 1.24 billion bushels, compared with a year earlier, and have matched the USDA forecast for the entire season, government data show. As of May 29, sales not yet shipped totaled 163 million bushels, up 24 percent from a year earlier, the USDA said yesterday in a report.

Processor bids in central Illinois, near Decatur-based Archer Daniels Midland Co., were steady at 25 cents to 40 cents over July futures compared with yesterday, USDA data show. The bid has risen from 10 cents to 25 cents a month earlier, even as futures rose $1.245 a bushel, or 11 percent, during the same period.

Feed Bids

Processor offers for sales of animal feed made from the oilseed were also steady at $20 to $28 over July soybean-meal futures on the CBOT, compared with yesterday. The price for meal sent by truck has risen 13 percent to an average of $420 for 2,000 pounds, compared with $372.50 a month earlier, USDA data show. About 48 pounds of animal feed is produced from a 60-pound bushel of soybeans.

Profit margins for Illinois soybean processors have risen 26 percent to an estimated 87 cents a bushel this week, up from 69 cents at the end of April, USDA data show. Margins are the best since early November.

“The export markets are now competing with the processors for soybeans,” Roose said. “As long as processors continue to sell the products profitably, they will keep buying soybeans to run their plants.”