Mother Nature gets temperamentalFor some time, there has been much discussion about weather and the adverse effects on crop production for major exporters in the world. This has helped grain markets get a much-needed and appreciated rally to relieve oversold conditions and bring interest and life back to ag commodities.
For some time, there has been much discussion about weather and the adverse effects on crop production for major exporters in the world. This has helped grain markets get a much-needed and appreciated rally to relieve oversold conditions and bring interest and life back to ag commodities.
USDA says China will import 48 million metric tons of soybeans in 2009 to ’10 and a record 50 million metric tons in 2010 to ’11. Brazilian analysts are estimating that China may import 30 million metric tons of soybeans from them this year. That is a lot of soybeans.
Because of the lateness of the spring, Chinese farmers are said to have planted shorter-term varieties to help make the most out of the shortened season. Shorter maturing varieties tend to yield less. The chairman and chief consultant of Shanghai JC Intelligence was quoted as saying that his company anticipates China will import some 1.7 million metric tons of corn this year and 5.8 million metric tons next year. The demand for corn simply is outstripping the country’s production trend as China’s economy continues to grow.
A trade dispute with Canada and to some degree, Australia originally had caused China to ban imports of rapeseed imports because of blackleg disease. Crushers in Hubei, China, since have reduced their standard for moisture content in rapeseed from 13 percent to 15 percent.
Canada has experienced a wet spring in Saskatchewan and Alberta. Saskatchewan accounts for a major portion of Canada’s exports of rapeseed. Canola production is expected to decline by 20 percent this year. Canada accounts for at least 50 percent of canola exports and an even larger percentage of rapeoil exports at 67 percent.
The former Soviet Union continues to deal with hot dry winds known as the Sukhovei winds. These winds quickly can decimate a crop. The latest estimates on this year’s crop is that production should decline by 20 percent. The former Soviet Union exports out of the Black Sea and has been great competition to the U.S. in the past. That region grows about 46 percent of the world’s sunseed and is forecast to account for nearly 44 percent of the world trade, while it also accounts for about 63 percent of the world’s sunoil.
El Nino has been transiting quickly this year toward a La Nina and may achieve that endeavor by sometime in August. La Nina’s this early could be detrimental to Brazilian, and perhaps, Argentine soy production.
While three of the world’s six major exporters are dealing with weather issues and poorer production in wheat and oilseeds, we note that sunseed and canola are oilseeds that produce more oil than soybeans. Therefore, these two oilseeds carry premiums to soybean oil. The next alternative is palm oil, but this year, that, too, is forecast to be in shorter supply as dry weather will hurt this crop as well, not to mention the premium palm oil carries to soybeans.
As we go forward, if the weather continues on its path of too much rain in some areas and not enough in others, we may see that soybeans have to pick up the slack for sunseed, rapeseed and canola. That may create an even bigger demand for U.S. soybeans.