"While there is some evidence of a
slowdown in soybean meal and oil use, soybean prices are likely to
remain well-supported until more is known about additional Chinese
purchases and the progress of the South American crop," said Darrel
Good. "If Chinese purchases slow, as expected, and the South
American crop continues to make good progress, prices may well move
lower through the winter months.
"New highs may require some problems
with the South American crop."
Good's comments came as he reviewed the
soybean market. The small U.S. soybean crop of 2003 means that
consumption of U.S. soybeans during the 2003-04 marketing year will
have to be significantly less than during the 2002-03 marketing
Year-ending stocks probably cannot be
reduced much below the current U.S. projection of 125 million
bushels, Good noted.
"If that is the case, consumption of
U.S. soybeans will be limited to about 2.505 billion bushels this
year," he said. "The actual supply of soybeans may be somewhat
different than the current forecast, however, depending on the size
of the final crop estimate in January and on the magnitude of
"At 2.505 billion bushels, use will
have to be 288 million bushels, or 10.3 percent, less than use
during the 2002-03 marketing year. The vigil for indications of a
slowdown in use is under way."
Good said the soybean market has
focused on the export market for signs of a slowdown in consumption.
The USDA has forecast a decline in exports of 155 million bushels,
or nearly 15 percent, from shipments of a year ago. Export figures
to date do not reflect any of the "rationing" in consumption that is
"Shipments during the first quarter of
the 2003-04 marketing year are reported at about 350 million
bushels," he said. "That figure is consistent in the USDA weekly
report of export inspections and in the weekly report of export
"Inspections are nearly 7 percent
larger than inspections reported at this time last year. However,
shipments are 15 percent larger than reported in the export sales
report last year. Whatever the correct figure, exports are larger
than those of a year ago."
In addition, unshipped sales as of Nov.
27 were reported at 345 million bushels, 26 percent larger than
unshipped sales on the same date last year. The only sign of a
slowdown in export demand was the rather small export sales of 9.4
million bushels reported for the most recent reporting week, which
ended Nov. 27. The market discounted the small sale, expecting China
to resume purchasing later this month.
[to top of second column in
The USDA has forecast a decline of 130
million bushels, or 8 percent, in the domestic crush of soybeans
during the current marketing year. The Census Bureau reported the
September 2003 crush at 127.6 million bushels, 4.4 percent larger
than the crush in September 2002. However, the October 2003 crush of
144.9 million bushels was 3.1 percent smaller than the crush of a
"The crush during the final 10 months
of the marketing year will have to be 9.8 percent smaller than the
crush of a year ago for the total to be at the USDA projection,"
Based on Census Bureau estimates of
soybean meal production and month-ending stocks in October, apparent
meal consumption during October (the first month of the 2003-04
marketing year) was 3.4 percent less than during October 2002.
Soybean oil consumption during the month was down 4.3 percent. For
the year, the USDA projects a 7 percent decline in meal consumption
(domestic plus exports) and an 11.4 percent decline in oil
"Because the Census Bureau estimate of
stocks only reflects inventories at mills, calculations of the rate
of consumption based on only one month's data can be misleading,"
said Good. "However, it appears that some decline in meal and oil
use is under way."
Good added that some argue that the
decline in soybean oil consumption will have to be even larger than
projected because of the lower oil content of the 2003 U.S. soybean
crop. A lower oil yield was evident in the October Census Bureau
crush report. The average oil yield per bushel of soybeans crushed
in October was 11.12 pounds, 0.19 pounds lower than the record yield
of a year ago and about 0.1 pound below normal. With a crush of
1.485 billion bushels, the lower than normal oil yield would result
in about 148.5 million pounds less oil production. That is
equivalent to about three daysí use.
"One other troubling forecast by the
USDA is the expectation of a second consecutive year of very small
'residual' or unexplained use of soybeans," said Good. "For the
three years from 1999-2000 through 2001-02, annual residual use was
estimated at 74 to 79 million bushels, or about 2.7 percent of total
to 42 million last year and is projected at only 39 million this
year, or 1.6 percent of total use. Quarterly stocks reports should
reveal if that forecast is on target and/or if there is an error in
the 2003 crop production estimate. If residual use exceeds the
forecast, fewer soybeans will be available for crush or export."
of Illinois news release]