July 10, 2012
Oilseed traders around the world are watching crop developments as closely as ever this year, but all stress that other factors, particularly the turmoil in currency and banking markets and developments in other commodities, notably crude, are likely to have as big an effect as the basic supply and demand situation for oilseeds.
“Declines in other markets, including crude oil and equities, partly due to an uncertain world economic outlook, sparked bouts of heavy fund-long liquidation,” the International Grains Council (IGC) said in its Grain Market Report at the end of May.
A tighter than expected official 2012-13 supply and demand forecast, released on May 10, provided temporary support.
“However, with U.S. soybean planting progressing at a rapid pace and with forecasts for favorable near-term weather, prices resumed their downward trend in the second half of the month. Because of earlier than normal wheat harvesting, there were ideas that plantings of double-crop soybeans might increase, contributing to bearish sentiment,” it said. “Export demand from China, which had been robust for much of May, showed signs of slowing more recently and this, coupled with the sharply firmer dollar, added to the negative tone.”
Owing to the steep drop in futures and weaker export premiums, export quotations fell by $42, to $526 fob (Gulf), it said.
According to the IGC, world soybean production in 2011-12 is estimated at 236.9 million tonnes, a decline of 11% from the previous year, “reflecting sharply reduced outturns in all key producers.”
Despite increasing shipments to China, the IGC also expects world trade in soybeans to fall for the second consecutive year to 88.9 million tonnes, from 91.2 million the year before. However, it expects strong demand from Asia and the E.U. to boost soybean meal trade to 57.4 million tonnes from 56.9 million.
“With harvesting in South America largely complete, a more informed assessment of the impact of drought conditions on yields can be gleaned,” the report said.
It predicted a fall of 16% in Argentina’s crop, while Brazil’s is forecast to fall by 10 million tonnes to 65.6 million. Paraguay’s crop is expected to be sharply lower, down from 8.4 million tonnes the year before to 4.2 million.
In its June World Agricultural Supply and Demand Estimates report, the USDA predicted total world oilseed production at 470.82 million tonnes in 2012-13, up from its figure of 437.02 million in 2011-12. It predicted world soybean production at 271.03 million tonnes, in 2012-13, up from 236.38 quoted for 2011-12.
It put U.S. soybean production in 2012-13 at 87.23 million tonnes, compared with 83.17 million in 2011-12. Argentina is expected to produce 18.47 million tonnes in 2012-13, down from 22.87 million the year before, while the USDA’s forecast for Brazil is 12.68 million tonnes, down from 22.94 million.
In a commentary on the WASDE report, Rabobank noted that adverse weather in U.S. growing regions could affect the USDA’s yield figure.
“Soybean supplies will remain tight until the South American harvest comes online at the beginning of 2013,” it said. “Export availability from South America is likely to remain limited, which will continue to put pressure on the U.S. balance sheet in order to meet global demand, particularly from China.
“A record amount of nearly 11 million tonnes of U.S. soybeans have already been sold for the 2012-13 crop year. We expect this will continue to be supportive of CBOT soybean prices despite an uncertain macro environment.
“Favorable weather and higher area harvested are needed in both North and South America in the upcoming season in order to provide any meaningful downside to current price levels.”