THE pace of consumption of U.S. soybeans continues to draw a lot of market attention. Domestic soybean consumption accelerated in December 2013, and export commitments have continued to exceed expectations into the new year.
According to University of Illinois agricultural economist Darrel Good, even with the normal seasonal slowdown in exports of soybeans, soybean meal and soybean oil, consumption seems to be on track to exceed the available supply and needs to be slowed.
For the 2013-14 marketing year, the U.S. Department of Agriculture projected a domestic soybean crush of 1.7 billion bu. and exports of 1.495 billion bu. With seed, feed and residual use of 109 million bu., consumption at the projected level would leave ending stocks of 150 million bu., or 4.5% of projected consumption, for the year.
The current projection of domestic crush is 11 million bu. (0.7%) larger than the crush during the previous marketing year and 45 million bu. larger than projected last September.
Based on estimates from the National Oilseed Processors Assn. (NOPA), the crush during September 2013 — the first month of the marketing year — was 9% smaller than the crush during September 2012. The monthly crush, however, exceeded that of a year earlier in each month from October through December 2013, with the cumulative crush during those three months exceeding the previous year's crush by 2.5%.
While the total crush during the first four months of the marketing year is only marginally larger than that of a year ago, the recent pace has exceeded expectations and suggests that the marketing year total could likely exceed the current USDA projection.
USDA's projection of marketing year exports is 175 million bu. (13%) larger than last year's exports, which were actually limited by small supplies and high prices. Good said this projection is very close to the record-large exports of 2009-10 and 2010-11.
Even with record-large soybean production outside the U.S in 2012-13 and expectations for even greater foreign production in 2013-14, Good said exports are still expected to be large.
Good explained that the large export projections reflect expectations for very strong demand from China, which is projected to import 2.535 billion bu. of soybeans from all origins during the current marketing year, up from about 2.2 billion bu. in each of the previous two years.
Through the first 21 weeks of the current marketing year, USDA reported soybean export inspections to all destinations at 1.115 billion bu., 17% more than cumulative inspections of a year ago. Good suggested that this means the pace of shipments to date is higher than the pace implied by USDA's projection of the size of the year-over-year increase in exports.
Meanwhile, the magnitude of unshipped sales is also much larger than that of last year. As of Jan. 16, USDA reported that those outstanding sales stood at 514 million bu., compared to 307 million bu. at the same time last year. Nearly 53% of those sales were to China, and 23% were to unknown destinations.
Total export commitments (shipments plus outstanding sales) stood at 1.549 billion bu., 54 million bu. more than USDA's projection of exports for the entire year. Sixty-four percent of the commitments were to China.
If exports for the current marketing year reach 1.549 billion bu., Good said year-ending stocks would total only 96 million bu., or 2.8% of projected consumption. According to Good, stocks cannot realistically be reduced to such a low level, with 125 million bu. being a likely minimum level of ending stocks.
In other words, exporters appear to be selling soybeans that will not be available.
Good said there are a number of ways that the difference between USDA's projections and the current pace of consumption will be resolved, including a slowdown in the pace of the domestic crush, cancellation of some export sales, rolling some export sales into the 2014-15 marketing year, larger imports of South American soybeans this summer, smaller year-ending stocks than currently projected or a combination of these factors.
Prices for the 2013 soybean crop will be determined by how the balance between soybean supply and consumption is maintained. Cancellation of export sales would be the most negative development for prices. Good pointed out that the market continues to expect cancellations by China, but none have been confirmed.
A slowdown in the pace of the domestic crush would also indicate that supplies are adequate and would point to lower prices. Because of this, Good suggested that a lot of attention will be focused on the January NOPA crush report.
A continuation of large export shipments and sales would be the friendliest for prices, indicating that larger imports will be needed this summer and that year-ending stocks will be smaller than currently predicted. Good said for now, prices appear to be locked into a broad sideways pattern until the likely pathway becomes more obvious.
Sources near Kansas City, Mo., told Feedstuffs that railroad companies are having transportation difficulties due to winter weather, and these troubles have spread to grain elevators. Additionally, they said railroad companies are prioritizing oil over grains, making it even more difficult for grain shippers to keep bushels moving via rail.
Some elevators in the northern states have even quit bidding for cash grain because they are full and can't get the railcars needed for shipping orders. Many are only bidding for May, June and July corn, with one source reporting that bins are so full that it could be two to three months before things get straightened out.
Oats have been particularly affected, with no buying happening at all. An oat supplier in Wisconsin reported seeing oil trains going by every day but hadn't received any deliveries of oats. Sources said Canadian loadings are now two months behind schedule.
"The U.S. can't get (rail-delivered) oats or get rid of their corn," one market watcher said.
Corn prices are depressed, while oat prices are going up daily. The source said the market thinks there is a surplus of corn but suggested that it may all be merely a transportation issue.
With harsh winter conditions continuing for most of the country, Drew Lerner, president and senior agricultural meteorologist of World Weather Inc., released a weather outlook last week that did not suggest that better days are ahead in the near future.
Lerner said he expects cold temperatures to last through early April, and then from mid-April through most of May, expected rains could make planting difficult.
However, despite challenging weather conditions for the rest of winter into spring, Lerner said next summer may bring El Nino weather that will provide for good growing conditions.
U.S. corn prices remained fairly steady last week. Tom Leffler with Farm Futures said the corn market is really just treading water and trying to stay as close to its January highs as it can, with very little price-bullish news to support it. Nearby prices fluctuated only a few cents through the week, ending 6 cents higher at $4.335/bu. at last Thursday's close.
Although robust demand recently supported soybean prices, the 2013-14 (October through September) soybean market outlook now hinges on the pending large crop forecast. The forecast for Brazil indicates a widening gap between soybean production and total use (crush plus exports), which may signal lower prices ahead.
High prices have increased the area planted to soybeans in Brazil, which led USDA to raise its 2013-14 soybean production forecast for Brazil to 89.0 million metric tons (Figure). The new forecast is up 1.0 mmt from the previous estimate, well above last year's record crop of 82.0 mmt and nearly equal to this year's U.S. harvest of 89.5 mmt.
U.S. soybean prices posted losses again last week as nearby prices fell 16.25 cents midweek to close slightly higher last Thursday at $12.75/bu. Rumors of China canceling orders and the Lunar New Year holidays may have been to blame, but a recent currency crisis in Argentina meant farmers in the country had to sell some of their inventory to free up cash.
Last week, the peso fell 12.5 points to the U.S. dollar. To limit the loss, Argentina's government was taking action to allow it to drop only eight points to the U.S. dollar.
Feedstuff prices were mostly mixed for the week. Soybean meal found support from the higher soybean complex. Demand was moderate and supplies readily available for most ingredients.
A West Coast source said a huge fire at an almond huller facility in California last week reportedly destroyed almost 30,000 tons of almond hulls at an estimated value of more than $2.5 million. The loss, plus the drought situation in California, has driven up the price of almond hulls $15-20 per ton.