April 11, 2012

 

US soy exports forecast up

US soy exports is expected to rise as South America's poor harvest this year drive buyers to the US, the federal government said Tuesday (April 10).

 

The USDA's monthly report reaffirmed concerns about tightening soy supplies, which have driven prices up by 30% over the past four months. The government slashed its soy production estimate for Brazil to 66 million tonnes for the current crop marketing year, down 2.5 million from the prior month and one million tonnes below what analysts were expecting.

 

The USDA raised its projection for soy exports to 1.29 billion bushels, up 15 million from its March forecast, and lowered its domestic stockpile projection for the end of the marketing year by 9.1% to 250 million bushels. The marketing year ends Aug. 31.

 

The report sets up a "potentially explosive" situation for soy prices in the coming marketing year, particularly if South American production estimates are cut further, said Rich Feltes, vice president of research for brokerage R.J. O'Brien.

 

But soy futures prices at the Chicago Board of Trade rose only slightly. Some analysts said a tightening supply outlook has already been priced in. CBOT soy for May delivery were up 1%, or 14 cents, at US$14.45 per bushel in late morning trade.

 

Corn futures declined as the USDA left its domestic corn stockpile projection for the end of the marketing year unchanged at 801 million bushels, surprising traders who had widely expected a decline. CBOT futures for May delivery were down half a cent to US$6.4850.

 

"We're tight, but we're not going to run out," said Sal Gilbertie, president of Tecrium Trading, which operates several commodity exchange-traded funds.

 

A drop in stockpiles was expected, in part, because of strong US corn export sales recently, including confirmation of deals with China.

 

Instead, the USDA said that a quick start to the corn planting season, and increased acreage across the US South, would lead to an early harvest that replenishes corn supplies before the marketing year ends. It added that livestock producers would feed more wheat to their animals instead of corn, helping keep corn supplies stable.

 

The government's assumptions on early corn planting could add further support to soy prices, Gilbertie said. Those early planted acres are coming at the expense of soy, which will make it tougher for the US to replenish global supplies that have contracted due to the South American drought.

 

"There's going to be less soy acreage than we need," Gilbertie said.

 

Still, traders are on guard for signs that money managers might look to trim their risk in the market, as investment funds already hold a large net long position.

 

"The market is terribly vulnerable to a setback, as the market has priced in most of the tighter supply forecasts already," said Anne Frick, senior oilseed analyst with Jefferies Bache.