Urbana, Illinois
November 3, 2003
The $3
increase in soybean prices over the past three months
seems rather large in the face of rising world oilseed
production, said a University of
Illinois Extension marketing specialist.
"The market has focused on the extent of the soybean supply
problem in the United States and the large increase in purchases
by China," said Darrel Good. "In addition, of course, the South
American crop is still a long way from harvest. Until there is
solid evidence of a decline in the rate of consumption of U.S.
soybeans, prices are expected to be well supported.
"When a decline is detected, prices could begin to erode,
particularly if South American crop prospects remain large."
Good's comments came as he reviewed the soybean market, where
prices continue to march higher as the market looks for signs
that the rate of soybean and soybean product consumption is
declining in line with available supplies. Soybean prices
advanced about 30 cents last week, with nearby futures trading
over $8.
The Census Bureau soybean crush report for September 2003
reported a monthly crush of 127.3 million bushels, nearly five
million above the level of crush during September 2002. The
average crush margin was extremely large in September 2003 as
product prices advanced more sharply (14 percent) than soybean
prices (about 9 percent).
"Even with a larger crush this year, reported stocks of both
soybean meal and soybean oil at the end of September were
smaller than stocks of a year ago," said Good. "Mill stocks of
soybean oil were at the lowest level
since December 1998. Apparent use of soybean meal during
September 2003 was nearly 5 percent larger than use in September
2002. Apparent consumption of soybean oil was 2.6 percent
larger."
Export sales of soybeans also remain extremely large. New sales
for the week ended Oct. 23 totaled almost 60 million bushels.
Unshipped sales as of Oct. 23 were reported at 399 million
bushels, compared to 307 million on
the same date last year. Additional sales were reported last
week in USDA's daily reports of sales exceeding 100,000 tons.
The USDA's weekly export inspection report shows cumulative
shipments through Oct. 30 of 180 million bushels, 1.5 percent
more than cumulative exports of a year ago. For the year, the
USDA has projected a 170 million
bushel (16 percent) decline in U.S. exports due to the smaller
available supply.
"Much of the increase in U.S. soybean export activity so far
this year is increased business with China," said Good. "As of
Oct. 23, China had imported or purchased for import 163 million
bushels of U.S. soybeans, double the commitments on the same
date last year.
"Nearly 31 percent of U.S. soybean export commitments to date
are to China. However, all major buyers of U.S. soybeans, except
Indonesia, have made larger purchases than at this time last
year."
The rally in soybean prices last week was led by soybean meal.
December 2003 meal futures advanced nearly 5 percent while
December 2003 oil futures declined about 2 percent. A review of
the most recent USDA world oilseed
production forecasts suggests that rationing will have to occur
more in protein meal consumption than in vegetable oil
consumption.
U.S. soybean production in 2003 is forecast to be 7.65
million tons less than produced in 2002.
World cottonseed production is expected to be 2.87
million tons larger due to larger crops in China and India.
World peanut production is projected to be 2.66 million
tons larger due to a large increase in crop size in India. World
sunflower production is expected to be 2.99 million tons
larger due to larger crops in Russia, Ukraine, Argentina, and
central Europe.
Finally, world rapeseed production is expected to be five
million tons larger than the 2002-03 crop due to increased
production in India, China, and Canada.
"In total, world production of non-soybean oilseed crops in
2003-04 is projected to be 14.1 million tons larger than
production last year," said Good. "That increase is 84 percent
larger than the decline in U.S. soybean
production. If South American soybean production in 2004 reaches
the current USDA projection of 101.25 million tons, an increase
of 9.35 million tons from 2003 production, world oilseed
production this year will be 17.9
million tons -- 5.4 percent -- larger than production of a year
ago."
Good said that based on current 2003-04 world oilseed production
forecasts, there appears to be an abundance of world vegetable
oil.
"The USDA forecasts a small increase in year-ending stocks of
all vegetable oils outside of the United States," he said. "In
fact, foreign meal stocks are expected to increase slightly as
well." |