February 13, 2006
U.S. Soybean Ending Stocks Seen Larger Than Previously Thought
U.S. soybean ending stocks for 2005-06 could reach a record 15.1 million tonnes, USDA said in last week’s S&D report. USDA’s 1.36 million tonne upward revision in their ending stock estimate arose from a 1.09 million tonne export cut and a 272,000 tonne lower crush estimate. Soybean exports are projected at 24.8 million tonnes, 5.25 million tonnes below last year’s record. USDA said.
On the product side, soybean meal and oil domestic use estimates were cut by quantities commensurate with the lower crush. Domestic soybean meal and oil consumption are both expected to be lower, reflecting lower-than-expected disappearance during the first quarter of the marketing year. Consequently, U.S. soybean crush is will likely be 46.8 million tonnes, USDA said.
Meanwhile, USDA expects Brazil to produce 58.5 million tonnes of soybeans in 2005-06, while Argentina’s crop estimate was lowered to 40 million tonnes from 40.5 million. Record Brazilian soybean exports for October through January have reduced bids for U.S. soybeans in EU-25 and China, and large new-crop supplies in South America are expected to further pressure U.S. exports in the second half of the marketing year.
Global oilseed production for 2005-06 is projected by USDA to be a record 389.3 million tonnes. Small declines for soybeans and sunflowerseeds are more than offset by increased cottonseed production in China. Global oilseed stocks are projected at a record 63 million tonnes, 20 percent above year-earlier levels, USDA said.
Conab Expects 58.1 Million Tonne Crop; Drought Cut Brazilian Soymeal Exports
Brazil’s National Commodities Supply Corporation (Conab), estimates their 2005-06 soybean crop to be 58.1 million tonnes. Conab’s latest estimate is on the same level as the December estimate despite some crop losses in the southwest of Parana state. Conab is part of Brazil’s Agriculture Ministry.
“With good crop production in Paraguay and Argentina, coupled with the second-biggest harvest in U.S. history, we should have excessive soy supply, with an increase in global soy stocks,” Conab said in its report, adding that 2005-06 would be tight on margins because Brazilian and international soy prices are likely to fall.
In related news, drought prevented Brazil from producing a record soybean crop last year and also stopped it from setting a new soymeal export record. Brazil exported 14.42 million tonnes of soymeal during 2005, which was just shy of the all-time high of 14.49 million tonnes set the previous year. In 2005, Brazil saw a fall in sales to the Netherlands, while Germany and France took similar amounts as in 2004.
Brazil harvested 51.1 million tonnes of soybeans in 2004-05 but had expected closer to 60 million tonnes. Poor weather destroyed over half of the soybean crop in the state of Rio Grande do Sul and a third of the crop in Parana.
Global Oil And Fats Trade To Expand
Global trade in oils and fats is expected to grow continuously during 2005-06, with overall trade expected to rise by 5%. The world’s seven leading exporters of edible oils and fats – Malaysia, Indonesia, the U.S., Brazil, Argentina, Canada and the EU are expected to satisfy as much as 82% of global oil import requirements in the coming season, according to the UN Food and Agriculture Organization (FAO).
U.S. shipments, which recovered in 2004-05 after a sharp drop in the previous year, are forecast to expand by 2%. Palmolein exports are expected to grow just 5%, down from an average growth of 13% in recent years.
Asia, led by China and India, is expected to remain the main import market, followed – at a considerable distance behind – by the EU, said FAO. The organization expects over 13 million tonnes of aggregate imports in 2005-06, with China’s share of global imports is expected to climb to 19%.
In India, however, the deficit between the production and consumption of domestic vegetable oil is expected to further narrow this season, causing a probable reduction in imports by about 3% in comparison with last season. FAO said. During the oil year that ended on November 30, 2005, India imported 5.04 million tonnes of edible oils.
The level of global opening stocks in 2005-06 for oils are well above the historical average and, after a number of years of declining stocks, began to recover moderately in 2004-05, according to FAO.
PAGE TOP South African Biodiesel Plant Could Boost Soy Trade
The biodiesel plant now under consideration by South African petrochemicals group Sasol and the Central Energy Fund (CEF), could almost triple soybean demand in South Africa. Sasol and the CEF said that the proposed biodiesel plant would require more than 500,000 tonnes of soybeans to produce 100,000 tonnes of biodiesel per annum. At present, South Africa consumed about 275,000 tonnes of soybeans per annum and in the 2005-06 season, South African farmers harvested 272,500 tonnes. However, Sasol spokesperson Johann van Rheede said that it was “very early days” for the project
Soy Complex Up On Fund Buying And Dry Weather In Brazil
The soy complex closed higher on February 9 reflecting fund buying pressure and concerns about dry conditions in southern Brazil. The rally was surprising given USDA’s larger-than-expected increase in its 2005-06 carryout. While Malaysia’s palm oil exports are lagging year-ago levels, production has posted even bigger declines the past 2 months. Vegetable oil supplies are more than ample for 2005-06, but a growing biodiesel industry threatens to tighten up the oil situation thereafter. The soybean fundamentals are extremely bearish with the 2005-06 U.S. carryout heading above 16.3 million tonnes. A large South American crop would increase the supply, but there appears to be enough concerns about southern Brazil and perhaps elsewhere to support prices at present.March bean futures closed up $3.58 finishing at $215.96; May was $3.86 higher, closing at $221.10; and July gained $2.85 ending at $224.23. March meal was up $1.54, closing at $200.18; May was $1.21 higher, finishing at $202.49; and July increased $1.65 to finish at $205.69. March oil closed $11.02 higher to finish at $499.34; May increased $11.02, closing at $508.82; and July gained $11.68, ending at $517.64.
Soy Complex Up On Oversold Conditions And A Boost In The Wheat Market
The soy complex closed higher on February 2 reflecting oversold conditions and a surge in the wheat market. The funds were modest buyers of soybeans and soybean oil, but the oil share was under pressure from a surprising upward revision in December soybean oil stocks. Demand developments are not doing anything to hurt prospects for a record large U.S. soybean carryout, which leads to the assumption that 2005-06 U.S. exports probably will have a hard time USDA’s 25.9 million tonne forecast. The market is apparently factoring in a big risk premium for South America to have a third consecutive crop shortfall. However, that does not seem to be warranted given the current favorable situation in both Brazil and Argentina. March bean futures closed up $1.65 finishing at $214.58; May was $1.65 higher, closing at $219.27; and July gained $1.47 ending at $223.03. March meal was up $0.77, closing at $200.51; May was $1.10 higher, finishing at $203.59; and July increased $1.10 to finish at $207.01. March oil closed $2.87 higher to finish at $483.91; May increased $3.09, closing at $493.61; and July gained $1.98, ending at $501.33.
