- Oil World have revised upwards, by 1.7 million mt, their estimate of total global output of the seven major oilseeds from a month ago, and the new total of 478.4 million mt is an increase of 22 million mt from a year ago. If these numbers prove to be correct, and Oil World are pretty credible in this respect, this will help to rebuild global stocks from last year’s drought depleted stock levels. The key upgrades were in sunflower seed (1.5 million mt), rapeseed and canola (1.3 million mt) to all time highs of 40.2 (suns) and 64.8 (rape & canola) million mt respectively.
- Less spectacular though was their 1.7 million mt downgrade in their estimate for soybean production to 282.5 million mt. The US accounted for a downward revision of some 2.5 million mt, Canada a reduction of 0.35 million mt whilst India was forecast higher by 1 million mt.
- 2013/14 opening oilseed stocks are expected 6.35 million mt higher at 73.4 million mt, and with overall output increased by 28 million mt from a year ago to 552 million mt it is expected that end stocks will rise to 85.8 million mt, of which 72.6 million mt are soybeans. This gives a projected stocks/use ratio of 18.4%, the best in four seasons, helping to bring to an end the tightness which has been experienced recently.
- Looking forward, Brazil’s Mato Grosso region (their major soybean producer) has been unusually dry, and is forecast to remain so at least until mid-September. If dryness extends beyond then, plantings may well be delayed. Southern Brazil on the other hand has more favourable soil moisture conditions.
- The current high price of soybean meal appears to be largely driven by tight global supplies, and is likely to remain so through the remainder of August and September, despite the promise of a recovery in production, exports and usage in the second half of this season.
- After initial price declines we have seen prices strengthen again on potential US soybean production fears. However, current (high) price levels reflect both the low level of crush in S America, despite their good crop, as well as the tightness of soybean supplies in the US. We believe downward price pressure will be seen once new crop US supplies begin to filter through. It must be borne in mind that there will be strong competition from US domestic demand which could well impact export availability at the beginning of the season.
- That said, if the US crop is a large one and the weather plays ball, and S American new crop production is large (as currently anticipated) we could well see significant price pressure on soybean meal in the Oct 2013 to Sep 2014 season.