Higher 2021/22 US soybean (SB) yields, production and US and global stocks as described in USDA’s Sep report indicate that the US and global SB stocks are building up which is negative for global SB price. Despite the likelihood of a La Niña revival which will cause Argentine drought again during 4Q21-1H22, we only anticipate a peak global SB price range of $14-16/bushel (below its recent high of $16.6/bushel in May 2021) due to the anticipated Chinese SB demand slowdown in 2H21-2022. With the expected global SB price downtrend which will squeeze GM in 2H21-2022, we then rate TVO as a HOLD for a decent dividend yield of 6-7%.
USDA’s Sep report—negative on higher US and global stocks
In its Sep 10 Crop Production report, USDA revised up the US SB yields by 0.6 bushel/acre MoM (to 50.6 bushels/acre) to reflect higher yields of Iowa and Minnesota. USDA upped SB yields of Minnesota significantly with its MoM largest increase of 4 bushels per acre. Moreover, USDA revised down the harvested area by 0.3m acre (to 86.4m acres). With higher yield impact more than offsetting lower harvested areas, the 2021/22 US SB production was revised up by 0.8% or 35m bushels (to 4.37bn bushels). USDA lowered the forecast of 2021/22 US season-average farm price by US$0.80/bushel to $12.9/bushel. We regard higher US yields in Sep as negative due to higher US production.