April 20, 2012

 

 

Despite data for US consumption of oilseed falling below market estimates, commentators sounded an upbeat note on soy prices, sending futures on course for their weakest day in nearly a month.

 

US soy processors crushed 140.5 million bushels of the oilseed last month, the National Oilseed Processors Association (Nopa) said.

 

The data fell below estimates ranging from 141.4-143.8 million bushels, and disappointed investors, coming days after the USDA had highlighted a "rejuvenation" of the domestic crush market in February "precipitated by rallying prices for soymeal and soyoil".

 

"Stronger-than-expected domestic use" of soymeal had likely been "supported by larger inventories of hogs on hand than originally indicated for the fall and winter quarter", the USDA said, while attributing stronger soyoil consumption to higher demand from biodiesel plants.

 

Roy Huckaby, executive vice-president of the Linn Group in Chicago, said that it appeared that profitability for crushers in March had fallen short of expectations, as processors struggled to get rid of high-priced soymeal.

 

"The problem may be that soymeal was not so easy to get rid of. They had to discount export meal.

 

"It may be that dragged on profitability."

 

In the US, the weaker data in the north west and south west of the US, areas including regions where corn ethanol production has been particularly strong, may have had a part to play, in providing rich supplies of distillers' grains, a by-product of manufacturing the bio-fuel and a rival to soymeal in feed rations.

 

However, he highlighted that the crush data were, while below market expectations, up 4.2 million bushels on month, and 6.1 million bushels on the March 2011 figure. And a strengthening in Argentine and Brazilian soymeal and soyoil prices over the past month suggested a pick-up in the US market,

 

"It was a different market at the start of March," Huckaby told Agrimoney.com.

 

Indeed, data from Morgan Stanley on Monday showed US soy crush margins soaring to about US$1.50 a bushel, double those at a late summer nadir.

 

"The improving profitability of the crushing industry bodes well for US crush demand," Morgan Stanley said.

 

The bank added that a rise in margins for processors in China, the top importer of the oilseed, to more than CNY300 (US$47.56) a tonne, from a negative CNY100 (US$15.85) a tonne at the start of 2012, was also "constructive for US soy".

 

Furthermore, Standard Chartered hiked its forecast for average Chicago soy prices this year to US$14.80 a bushel, from US$13.13 a bushel, citing disappointing 2011-12 harvests in both the US and South America.

 

"For the first time ever, the global edible oil/oilseeds market is facing declines in soy output in both the US and Latin America, where output is forecast to drop by seven million tonnes and 19 million tonnes respectively," StanChart analyst Abah Ofon said.

 

With these declines translating into a five million-tonne drop in soyoil output, "which will result in a considerable squeeze on edible oil markets", Ofon raised his forecast too for average Chicago soyoil prices this year, by US$0.08 a bushel to US$0.64 a bushel.

 

Nonetheless, May soyoil stood 1.5% lower at US$0.5566 a pound in late morning deals in Chicago, where May soy stood down 1.4% at US$14.17 a bushel.