February 28, 2012

 

US soy surplus to fall on soaring exports

 

 

Unlike those of the other big three traded crops, supplies of soy in the US will drop next season, as weaker competition from South America allows exports to hit a record level.

 

US soy inventories will fall 25% to a three-year low of 205 million bushels in 2012-13, the USDA said, in data viewed by investors as one of the most important of the year.

 

While the US soy harvest will grow by 6%, use will expand even faster, led by a 22% jump in shipments to 1.55 billion bushels, thanks to "strong" growth from foreign buyers which South America will have a limited ability to meet, following disappointing harvests, which are in their early stages.

 

"The US share of global trade is likely to rise partly supported by reduced competition from South American countries, where exportable supplies are impacted by drought-reduced crops expected to be harvested in 2012," the USDA said.

 

The drop in US soy stocks contrasts with higher inventories forecast for corn, for which the USDA forecast a record harvest, and wheat, for which an 8% rise in production, to 2.17 billion bushels (58.9 million tonnes), will more than match demand.

 

"Strong competition from other major wheat exporters" will prevent US shipments growing in 2012-13, the USDA said.

 

The world crop will come in "just below" this season's record, with poor Ukraine prospects offsetting the potential for large harvests in Canada, the EU and Russia.

 

US wheat consumption will show only small growth, and only for feed supplies, for which use will be spurred by a relatively low price compared with corn.

 

The lower prices forecast for grains will weigh on the soy market, forcing values slightly lower next season despite lower US supplies.

 

Foreign demand for soy next season "will be driven" by China, with "minimal increases" expected in other leading importers, such as the EU and Japan, the USDA said. "Key factors supporting China's soy imports for 2012-13 include strong demand for vegetable oil, growth in the livestock sector, expansion in the crushing sector, and government policies."

 

The export figure also represents a sharp upgrade, of 220 million bushels, on an outline figure pencilled in last week, when the USDA unveiled so-called baseline data, setting out long-term forecasts, and based on calculations last November, before South America's drought struck.

 

For wheat, the USDA identified a "window of opportunity for sales" of the 2012 crop soon after supplies become available, in May-June.

 

"Foreign-held stocks are not expected to hamper US wheat exports as much as might be expected," given that many are already shipping "substantial" supplies to exploit elevated prices.

 

A rise in US stocks would be the first for three seasons, with inventories sapped last season by strong exports, after Russia banned grain shipments to bolster domestic supplies, amid a drought-depleted harvest.

 

In 2011-12, production was hit by a flood-affected spring sowing period, and by drought in southern US hard red winter wheat country.

 

At 957 million bushels, (26 million tonnes), US inventories would end 2012-13 at their second highest level in 25 years.