"Rumors about export demand, export
cancellations and potential imports of meal and oil could contribute
to the volatility," said Darrel Good. "Even with the price
uncertainty, new crop soybean futures are now high enough for
producers to start the 2004 marketing program."
Good's comments came as he reviewed the
soybean market. The 2003-04 soybean marketing year has just passed
the halfway point. Historically, much of the uncertainty about
demand and potential consumption of soybeans for the year has been
eliminated at this juncture. That is not the case this year.
"The pattern of U.S. soybean exports
and export sales has been somewhat unusual this year," said Good.
"Extremely large sales and shipments early in the year were fueled
by the Chinese buying binge. As of Feb. 26, the USDA reported that
China had imported 285 million bushels of U.S. soybeans during the
current marketing year, 29 percent more than during the same period
Unshipped sales to China as of Feb. 26,
however, were reported at only 12 million bushels, compared with
outstanding sales of 38 million bushels on the same date last year.
Net sales to all destinations for the last two reporting weeks
totaled minus 1.2 million bushels.
Cumulative export inspections to all
destinations through March 4 were reported at 715.7 million bushels,
compared with 796.1 million bushels at the same time last year.
Cumulative inspections 10 weeks ago were 10 percent larger than
inspections of the previous year but are now 10 percent less.
Cumulative exports as stated in the USDA's "Export Sales" report
totaled 725 million bushels as of Feb. 26, which is 4 percent less
than reported a year ago.
"The recent slowdown in the U.S.
soybean export program suggests that exports for the year will in
fact be down from those of a year ago, as projected by the USDA,"
said Good. "The USDA marketing-year export projection is currently
at 900 million bushels, nearly 14 percent less than exports during
the 2003-04 marketing year. Some expect that projection to be
lowered in the USDA March 10 monthly update of world supply and
Good noted that the pattern of the U.S.
domestic crush so far this year has also been somewhat unusual.
Because of the small U.S. harvest in 2003, the available supplies of
soybeans for domestic processing this year are significantly less
than supplies of a year ago.
"The USDA has projected a 10 percent
decline in the domestic crush for the year," Good said. "For the
first five months of the 2003-04 marketing year, monthly crush was
larger than that of a year ago in September, smaller in October,
about unchanged in November, smaller in December and larger in
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"Cumulative crush through January was
0.6 percent larger than crush of last year. The larger crush appears
to be driven by soybean meal demand. Based on the estimate of
month-end meal stocks at processing plants, consumption of meal from
October 2003 through January 2004 was about 0.1 percent less than
during the same four months last year. In contrast, apparent soybean
oil consumption was down 8.5 percent. In addition, the large January
crush resulted in a large increase in month-ending stocks of soybean
If the marketing-year crush is to be 10
percent less than that of last year, the crush during the last seven
months of the year will have to be down nearly 18 percent, Good
added. If exports fall short of the current projection of 900
million bushels, more bushels will be available for domestic crush.
"A 25 million bushel shortfall in
exports, however, would still require a 15 percent reduction in the
domestic crush during the last seven months of the year," said Good.
"The timing and pattern of that decline will be important for
prices, potential imports and decisions by end-users of meal and
oil. The longer the reduction in crush is delayed, the more abrupt
the required adjustment by market participants."
In addition to demand uncertainty, the
market will continue to react to changing prospects for the size of
the current South American harvest. Last month, the USDA projected
that crop at 3.75 billion bushels. A dry end to the growing season
in parts of Brazil and Argentina, along with rain-damaged crops in
parts of northern Brazil, likely reduced the crop size
significantly. A variety of forecasters expect the crop to be 150
million to 220 million bushels less than the current USDA forecast.
The USDA forecast will be updated on March 10.
"The market will be anticipating and
reacting to the USDA's March 31 "Prospective Plantings" report,
which will reveal U.S. producer intentions for soybean acreage in
2004," said Good. "Over the past month, the price of November 2004
futures increased by $1 per bushel and increased more rapidly than
December 2004 futures.
will relative crop prices and recent yield experiences impact
producer planting decisions? The direction of change, as well as
magnitude of change, in U.S. soybean acreage could have significant
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