| Is the U.S. Running Out of Soybeans? |
| Friday, 19 June 2009 14:15 | |||
 Urbana, Illinois, June 2009 – The need to slow the rate of consumption of soybeans is a well-known fact and there are a few indications that rationing has begun, but more confirmation is needed.
"The bottom line is producers will want to be ready to move old crop soybeans once the market is satisfied that sufficient rationing has occurred," said Darrel Good, University of Illinois Extension agricultural economist. The important issue for the market is how high prices must be to maintain a minimum level of stocks going into the 2009 harvest. "In general, prices will stay high or continue to rise until there is convincing evidence that the pace of consumption has slowed sufficiently to maintain at least a pipeline supply of old crop soybeans," Good said. Price strength may also be moderated by the fact that September 1 stocks tend to exceed expectations. In 7 of the past 10 years, stocks have exceeded the USDA's September projection. The largest difference was last year's 65 million bushels figure, resulting in a 90 million bushel increase in the estimated size of the 2007 crop. The change was partially anticipated based on unusually small estimates of residual use in the first three quarters of the year. In its monthly report released in February, the USDA projected 2008-09 year ending stocks at 210 million bushels. "That projection has been reduced each month since and was at 130 million bushels last month," said Good. The primary reason for the declining projection is the larger than expected export demand for U.S. soybeans dues to a shortfall in the 2009 South American harvest. The USDA currently estimates that crop at 3.556 billion bushels, 730 million smaller than the 2008 harvest. "In addition to the shortfall in the South American crop, export demand has been bolstered by China's decision to build inventories of soybeans," Good said. China is expected to import only 12 million bushels fewer soybeans this year than it imported last year, even though production there was about 75 million bushels larger than in 2007. As of the end of May, the USDA estimated that China had imported 629 million bushels of U.S. soybeans since September 1, 2008. That is 188 million more than were imported in the same period the previous year. Exports to all destinations during the current year are projected at 1.24 billion bushels, 240 more than projected last fall. As the projections for year-ending stocks have declined, soybean and soybean product prices have increased in an attempt to slow the pace of consumption. "Since early March, July 2009 soybean futures have increased by about $3.70 per bushel, while the average cash price in central Illinois has increased about $3.95 per bushel as the basis strengthened. Over the same period, soybean meal prices have increased a bit more (50 percent) than soybean oil prices (40 percent)." On the export side, there were net cancellations of sales for the week ended May 28, and the pace of shipments dropped sharply the past two weeks. The spike in the price of distiller's grain over the past two weeks (more than the increase in corn prices) suggests that livestock feeders are pursuing alternatives to soybean meal. The pace of exports and export sales of meal and oil are slightly above the pace projected by the USDA. The USDA will release its estimate of June 1 stocks of soybeans on June 30, 2009. In addition to ongoing consumption data, this report may provide some additional insight, in the form of residual use of soybeans during the third quarter of the year, about year ending stocks. "Unusually large or small residual use would suggest that the 2008 crop was incorrectly estimated, with implications for year-ending stocks. No such evidence was provided by the September 1, 2008 or March 1, 2009 stock reports and is not generally expected in the June report," Good said. SOURCE: University of Illinois Extension
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