TVO confident of soy output this year

Despite the cold weather in North America and Europe, TVO, Southeast Asia's largest soy oil producer, is not concerned about a shortage of soy supply this year as an increase in harvested area and yield will boost soy production.

The company thus believes that the market's concerns about the weather may raise the soy price only in the short term.

In its January 2010 report, the US Department of Agriculture (USDA) raised its forecasts for soy, soymeal, corn production and ending stocks in 2009-10 from its last report in December 2009.

Soyoil was the only exception, with the USDA revising down its ending stock estimate for 2009-10 to 2.54 million tonnes compared to its forecast of 2.59 million tonnes in December 2009.

Based on the updated USDA information and discussions with TVO, the USDA is not expecting soy, soymeal or corn prices to increase much from 2009 despite increases in the price of oil. This will help CPF on the cost side.

TVO is expected to enjoy a double-digit gross margin in 2010. With the new supply, the soy price will soften in 2010. Meanwhile, soymeal and soyoil production this year will increase by a smaller level than soy production.

Furthermore, a 4% increase in ending stocks of soymeal and a 12% drop in ending stocks of soyoil is expected. The prices of soymeal and soyoil will soften to a lesser degree than the price of soy. This suggests that the crush spread of soymeal and soyoil will rise in 2010.