February 9, 2009

ASA Weekly: World soymeal exports seen to pick up 

Earlier this month, soymeal outstanding sales had dropped to the lowest level for this time of the year since 2000 as export sales dropped off significantly in December and into early January. With weekly net export sales through mid-January were the lowest since 2000. However, the recent increase in both outstanding sales and the soymeal export pace may be changing the outlook.

Soy export inspections, on the other hand, during the week ended January 22, were just above 1 million tonnes for the second straight week. The rebound in the shipping pace since late December and early January, along with weekly export sales that exceeded 1.3 million tonnes in each of the previous 2 weeks before falling to 526,000 tonnes this past week, has prompted some analysts to boost their 2008/09 soy export forecasts.

The likely shortfall in Argentina's soy production may improve chances of US soy exports during the second half of the marketing year, bringing some support to the soy market in recent weeks. However, it is likely that a smaller Argentine crop would lead the nation to reduce its exports during the latter half of its marketing year, boosting US export prospects for the 2009-10 marketing year. It likely would take either a farmer strike in Argentina or government restrictions on exports to disrupt its March/August exports enough to appreciably impact US exports during that time.

Also of significance to soy export prospects is whether sales to China will continue its robust pace after the end of the Chinese New Year holiday celebration. China's purchases have begun to shift to South America with early soy harvest underway in northern Brazil. In addition, there are some indications that the Chinese government may begin releasing some of its soybean reserves into the domestic market in the next few months, which could undermine it combined imports from the United States and South America.

US freight movement continues to slump

The United States' economic output falls further behind as fourth quarter GDP was a negative 3.8 percent. Even though GDP was better than expected, it was considerably lower when adjusted for inventory, down 5.1 percent instead—the worst drop in 28 years. The freight markets have been signalling the slowness for quite some time. Freight movements, as part of the Transportation Services Index (TSI), during November, were 2.4 percent slower year-over-year, to an index of 107.6, the lowest level since January 2004 when the index was 106.5. The TSI essentially peaked during mid-2006, showed considerable slowness during 2007, and turned slightly higher during the first half 2008 on strong US exports, then started its recent slide in July 2008, when fuel prices were at record levels. The TSI will continue to edge lower going into 2009 on the realities of plant closures having a greater impact on freight movement.

Prior to the 2001 recession, the TSI peaked in December 1999 on the eve of the dotcom bust and 2000-date change debacle. Freight demand remained stagnant for two years, 2000 through 2002, before making its turn higher to new territory.

Soy complex lower as rain is expected in parts of Argentina