August 14, 2006
Soybean Crop Below Trade Expectations
USDA found soybean yields likely will be below trade expectations in its August survey. Soybean stocks are now projected to fall reflecting production of 79.7 million tonnes, 4.3 million tonnes below last year’s crop. Soybean yields are forecast by USDA to be 2.66 tonnes per hectare, 0.23 tonnes below last year’s record yield. Soybean yield prospects are reduced due to dry weather in the western Corn Belt and Plains. Lower production and reduced carryin leave ending stocks at 12.2 million tonnes, according to USDA.
Global oilseed production for 2006-07 also could fall to 383.2 million tonnes, down 6.5 million tonnes from 2005-06. Reduced U.S. oilseed production accounts for most of the decline (Total U.S. oilseed production for 2006-07 is projected at 89.2 million tonnes and is based on reduced soybean and peanut production). This would be the first year-to-year production decline since 1995-96. Foreign oilseed production is projected at 294 million tonnes, USDA said.
PAGE TOP
Biodiesel Production Jumps in May and June
The use of refined soybean oil in biodiesel production surged to 68,000 tonnes in June with May usage upwardly revised by 16,300 tonnes to 64,900 tonnes. Both months are sharply above the 43,500 tonnes of refined soybean oil used in April because of more than 379,000,000 liters of annual biodiesel capacity that came on line in May.
The larger-than-expected refined soybean oil usage in biodiesel production reported by the Census Bureau this past week along with the surprising upward revision in May usage does not indicate that overall soybean usage was larger than expected. In fact, June disappearance was reduced because the Census Bureau revised higher end-of-June soybean oil stocks. The increase in biodiesel usage of soybean oil has just shifted soybean disappearance from food uses to biodiesel for May and June.
Crop Size And Biofuel Economy To Soybean And Grain Shipment Patterns
Changes in the crop outlook and a robust biofuels economy will impact grain flow patterns this next year. The Northern Plains is a net surplus supplier of grain and soybeans, meaning it has more grain and soybeans than it consumes and stores within the region. In 2004-05 the region was estimated to have shipped out about 46 million tonnes then increased to 50 million for 2005-06. But this year’s smaller harvest and expanding ethanol market will pull back its net surplus level greater than 8% to 46.4 million tonnes. The surplus supplies from this region are usually sent to the Southwest feeding and Pacific Northwest export markets.
The Upper Mississippi region has had plentiful supplies of grains and soybeans and is expected to harvest a decent size crop. This region’s net surplus level is expected to increase nearly 10% to 66.8 million tonnes. This region will be worked hard as it has a strong export program to feed down the Mississippi River to the CenterGulf while supplying the feed markets on parts of the Southeast and the Texas Panhandle. The Texas Panhandle receives grain from the Central Plains and the Upper Mississippi. But, the volume of surplus grain in the Central Plains is expected to drop 18% to 26.1 million tonnes, limiting the volume that could be made available to the Texas Panhandle.
In other transportation news, as the price of diesel and crude oil climbs so will the surcharges assessed for shipments. Across the Class I railroads, fuel surcharges for August will average 17.8% per carload ranging from 12.8% on the Canadian National to 21.2% on the Canadian Pacific. For September fuel charges are set to run higher still to an average of 18.8%.
EU Biodiesel Production To Increase Demand For Oilseeds
Biodiesel production within the EU-25 could double to 6.3 million tonnes between 2006 and 2013, the European Commission said. This will lead to a 40% rise in oilseed production within the bloc by 2013 but also to higher vegetable oil imports, the Commission said.The Commission said it expected EU oilseed output to reach 27.7 million tonnes by 2013, up from 19.7 million produced in 2005.
Domestic demand for oilseeds was seen rising to 50.9 million tonnes by 2013, up nearly 11 million from last year, mainly due to a jump in biodiesel demand. Imports of vegetable oils are expected to rise “significantly” by 2013 to meet domestic demand, the Commission said without giving an estimate.
Indonesia’s Soy Demand Requires Imports
Despite efforts to become more self-sufficient, Indonesia still needs to import 1.2 million tonnes of soybeans annually to meet domestic demand standing at some 2 million tonnes, an official highlighted recently. In a report from The Public Ledger, Mukhlizar Mulkan, the Agriculture Ministry’s director for bean and tuber affairs, said that Indonesia’s soybean production only reached 800,000 tonnes last year while annual domestic demand stands at 2 million tonnes.
The only way to reduce Indonesia’s dependence on soybean imports was to intensify its food self-sufficiency program, especially in soybeans, Mulkan said. However, demand is expected to continue to grow, intensifying the need for more imports. Indonesia mainly imports soybeans from the United States.
Soy Complex Lower As Concerns Of A Dry Crop Are Eased
The soy complex closed lower on August 10 as a wide storm front that was moving through part of the growing region helped allay of some concerns about lack of moisture for the crop. Export sales came in at the bullish side of expectations. The near-term lows may be in for the soybean market, but larger subsequent USDA production forecasts could cause recent lows to be tested down the road. However, once the crop is mostly harvested and put away, front-month futures probably will be well supported in the upper $5.00 area as they have in recent years.
August bean futures closed down $1.84 finishing at $204.66; September was $1.93 lower, closing at $206.22; and November lost $2.11 ending at $211.00. August meal was down $0.77, closing at $174.05; September was $1.32 lower, finishing at $174.82; and October was down $0.88 to finish at $176.37. August oil closed $5.51 lower to finish at $575.40; September was down $7.05, closing at $577.61; and October decreased $6.83, ending at $582.46.
