Oilseeds: From tight to plentiful

Sue Martin,Agweek
Published: 11/02/2009

At the start of the crop year of 2009 to ’10, world stocks of oilseeds were fairly tight, estimated at a five-year low of 60 million metric tons, down 10 million metric tons from the previous crop year.

World consumption of the world’s seven oilseeds exceeded production two years in a row.

Notably, the largest supply shortage was in the soybeans at estimated world production of 212 million metric tons in 2008 to ’09, down 9 million metric tons from a year earlier. By the end of August 2009, soybean stocks fell to 47.5 million metric tons, down 13 million metric tons from last year. For 2009 to ’10, seven oilseed stocks are set to increase to an estimated 73.5 million metric tons. Stocks of soybeans should increase to about 63 million metric tons by the end of August 2010.

Note that is the end of the crop year. The U.S. has experienced extremely tight old crop supplies and a delayed harvest with heavily front end-loaded demand.

This is a year that could go down in the history books — all at the same time that South America is pretty much sold out (Brazil is estimated at 93 percent to 95 percent).

At the beginning of this new crop season, old crop supplies were down sharply with few beans in Argentina, Brazil and the U.S. Oil World feels that these tight stocks more than offset the potential increase in the U.S. crop for 2009 to ’10.

In fact, the end result would be a decline in combined soybean supplies for September 2009 to February 2010. The current forecasts call for the next two weeks to finally give producers a chance to harvest crops. Many farmers in wet saturated fields (Delta and the Midwest) opted to switch to corn harvesting and leaving the soybeans standing in the fields. Now, they probably will switch back to soybeans if the forecasts hold. It is now November and we already have lost two months of the new marketing year.

Every day that is pulled from the calendar without soybeans finding their way into the export channel is a day less of the U.S. securing that demand. We are just getting closer and closer to competition out of South America, especially Brazil.

Since China isn’t able to secure the soybeans in a timely manner, I suspect supplies at the ports in China are decreasing quite quickly and domestic usage is growing. Still, they still will need the soybeans down the road when available. We just need it to be U.S. soybeans.

The Brazilian mandate for biodiesel has been increased from 4 percent to 5 percent. Some Brazilian farmers have opted to plant earlier varieties in hopes of making it into the marketplace sooner to pull away the demand from the U.S.

Early variety soybeans tend to yield lower and with the new mandate, I would suspect that those early soybeans will be needed domestically. Soybeans made an even lower low in October and closed the month out higher than the close of September for November and January soybeans.

It appears that the harvest low is in and the October highs for soybeans should be fair game in November.

Yes, farmers probably will sell some soybeans before corn because of the profitability to generate year end cash. But commercials know they are caught behind the 8-ball as they have to get these ships loaded or watch demand shift southward. So if they don’t force deliveries, they will need to bid up for the soybeans to get farmers to sell.