Urbana, Illinois
April 28, 2008
While the pace of the domestic
soybean crush is slowing, the pace of exports and export sales
of U.S. soybeans remains generally strong, said a University of
Illinois Extension marketing specialist.
"For the year, the USDA projects exports at 1.075 billion
bushels, only 3.8 percent below the record shipments of last
year," said Darrel Good. "Through the first 34 weeks of the
marketing year, USDA reports exports of 907 million bushels,
only 2.4 percent less than shipped a year ago.
"However, Census Bureau estimates for the first six months of
the year exceeded USDA estimates by about 26 million bushels.
Last year, Census Bureau estimates through the first six months
of the year were about 10 million bushels below the USDA
estimates. For now, it appears that exports are on the same pace
as that of last year."
Good's comments came as he reviewed the soybean market. He noted
that a small U.S. soybean crop in 2003 resulted in a
year-over-year decline in the domestic soybean crush.
"Since then, the size of the domestic crush has grown each year,
from 1.53 billion bushels in 2003-04 to 1.806 billion bushels
last year," he said. "For the 2007-08 marketing year, the USDA
projects the domestic crush at 1.84 billion bushels, 1.9 percent
larger than the crush of a year earlier."
Good noted that the crush during each month of the first half of
the current marketing year was larger than the respective month
last year. The crush during the six months from September 2007
through February 2008 totaled 936.2 million bushels, 3 percent
larger than the total of the previous year.
The USDA's projection of a 1.9 percent increase for the year
implies that the crush during the last half of the year will be
0.7 percent larger than the crush during the last half of the
2006-07 marketing year.
"However, the Census Bureau estimated the March 2008 crush at
152.6 million bushels, 2 percent less than the crush during
March 2007," he said. "The year-over-year decline in the monthly
crush estimate is the first since April 2006.
"The March estimate is subject to revision, but implies that the
crush during the last five months of the year must total 751.2
million bushels, 1.2 percent larger than the crush of a year
ago, in order to reach the USDA projection of 1.84 billion
bushels."
Good said that the slowdown in the domestic crush in March 2008
appears to be the result of a slowdown in the pace of soybean
meal consumption.
"Apparent consumption--domestic and exports--in March 2008 was
about 3 percent less than during March 2007, the first
year-over-year decline since July 2006," he said. "Apparently
soybean oil consumption during March was a record 1.95 billion
pounds, 15.6 percent larger than consumption during March 2007."
As of April 17, the USDA reported that 163 million bushels of
U.S. soybeans had been sold for export, but not yet shipped.
Unshipped sales of a year earlier totaled only 116 million
bushels. The United States appears to be benefitting from an
interruption in export shipments from Argentina due to the
farmer strike protesting higher export taxes.
"It appears that exports during the current year could exceed
the USDA projection, offsetting a potential shortfall in the
domestic crush," he said.
Good said the weakness in the soybean basis has been a topic of
discussion over the past year. Basis levels remain generally
weak, but significant strengthening of the old crop basis has
occurred over the past four weeks. The average cash bid to
farmers in central Illinois was 85 cents under July futures at
the end of March. By April 25, that basis had strengthened to
about 46 cents under July futures.
"That is about equal to the basis of a year earlier, about 15
cents weaker than in 2006, and 30 cents weaker than in 2005,"
Good said.
Lack of convergence of cash and futures prices at delivery
markets at maturity of futures contracts has also been an issue
since July 2007. Convergence was especially poor for the July
and September 2007 contracts and the January and March 2008
contracts.
As the May 2008 contract approaches maturity, more normal
convergence appears to be occurring, he noted. Chicago basis was
reported at minus 36 cents on April 15 and minus 20 cents on
April 25. The average basis at Illinois River delivery markets
south of Peoria strengthened from minus 35 cents to minus 17
cents during the same period.
"Bids for 2008 harvest delivery have also reflected a
strengthening, but generally a very weak basis," Good said. "The
average harvest bid in central Illinois was about 95 cents under
November 2008 futures on April 25, about 20 cents stronger than
just six weeks ago, but about 60 cents weaker than a year ago.
"Continued strengthening of the basis may offset some of the
decline in futures prices expected over the next few weeks."
By Bob Sampson, University of
Illinois |
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