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"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 with 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.
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"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."
[University
of Illinois news release]
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