Structural Challenges for the US Delta Soybean Market

Soybean farmers in the US Delta recently wrapped up their second consecutive harvest with record low Mississippi River levels. With limited local crush capacity, nearly all Delta soybeans travel south via the river to export. Low water the last two falls curtailed barge capacities, making logistics prohibitively expensive, if even available at all.

The three states that make up the majority of the Delta, (Mississippi, Arkansas, and Louisiana) grow ~330 mil bushels (9 MMT) of soybeans annually, ~8% of the US total.  Low river levels have, rightly, taken all the oxygen out of the room when discussing markets in this region.  But its not just the river that is producing headwinds for these growers.  There is a more structural issue materializing.

Have a look at last week’s USDA WASDE data on the global soybean market, and compare it to ten years prior.  

This crop year, the USA is expected to export 48 MMT of beans, 28% of global import demand.  Down from 39% ten years ago.  Said another way, US exports have moved from 141 days to 104 days of global import demand in ten short years.  South America’s export season begins in February.  As their exports grow their shipping season extends deeper and deeper into the US fall.

And here is the Delta dilemma.  Delta harvest begins in early August, at least a month ahead of the Midwest.  This year ~60% of the Delta crop was harvested by Oct 1.  Historically Delta farmers enjoyed big early season premiums as they refilled an empty global pipeline.  Going forward those same early beans will have the toughest competition with lingering South American inventories.

Harvest carries seem inevitable.  The Delta will need to build bins to store beans (not easy with 80-90 degree harvest time temps) or develop new markets away from export (Oxbow Crush is working to be one of those new Delta markets). 

The implications of this stretch beyond the Delta.  Early season barge demand, upriver basis levels, CME futures spreads, all will see impacts.