May 21, 2008

 

ASA weekly: US soy complex lower, yet concerns linger on 2008-09 stocks
 

 

The US soy complex closed lower on May 15, with worries that the 2007-08 soy carryout looks extremely tight.

 

Analysts believe that the USDA understated last year's soy crop by more than 2.72 million tones.

 

Prospects for US soy stocks to build in 2008-09 are threatened by Argentina's high, sliding-scale export tax and Brazil's financing constraints that make it difficult to achieve any area expansion in South America.

 

The old-crop situation is potentially a powder keg ready to explode unless USDA's 2007 crop estimate was a huge miss.

 

If the market does become more concerned about the sufficiency of soy supplies for 2008-09 and beyond, it will be hard for the market to buy additional production because Argentine farmers are cut by 72 percent marginal tax that escalates to 95 percent.

 

Analysts said this is quite foreboding to the market given that Argentina has accounted for most of the world's increase in soy area over the last 5 years.

 

July soy futures closed down US$11.76, finishing at US$495.12; August lost US$10.84, closing at US$494.93; and September was down US$7.72, ending at US$487.95.

 

July soymeal decreased US$7.39 closing at US$380.29; August was US$6.17 lower, finishing at US$380.95; and September meal closed down US$4.08, ending at US$374.01.

 

July soy oil decreased US$32.41 to finish at US$1323.42; August was down US$32.19, closing at US$1330.70; and September was US$32.19 lower, closing at US$1337.75.

 

NOPA April crush below trade expectations

 

The NOPA crush for April released last week was roughly between 54,400 and 81,600 tonnes below trade expectations.

 

On the other hand, NOPA's soy oil stocks were larger than expected, dropping by 54,400 tonnes from the previous month compared with expectations for stocks to drop by about 72,600 tonnes.

 

The soy oil yield continued to rise seasonally, solidifying the 2007 soy crop as having the second highest oil content on record, surpassed only by the 2005 crop.

 

Domestic usage of soy oil was rather anemic, suggesting that the industry's 1.47 million tonne projection of soy oil used in biodiesel production during 2007-08 may be too large.

 

Although the NOPA crush was smaller-than-expected, it reflected a normal seasonal downturn in the crush.

 

CFTC may investigate volatile agriculture markets

 

The Commodity Futures Trading Commission (CFTC) has given a sign that it may step into the agricultural markets because of perceptions of excess volatility in recent months.

 

Testifying to the House Agriculture committee, Jeffrey Harris, chief economist at the CFTC, and John Fenton, director of market surveillance at the CFTC, said that the group would have several initiatives in the near future.

 

The group also suggested it would be looking at ways to improve the oversight of large financial participants such as hedge funds.

 

However, they CFTC stressed that there is little economic evidence to demonstrate that prices are systematically driven by speculators in these markets.

 

Rather the group said prices are being driven by powerful fundamental economic forces and the laws of supply and demand.

 

U.S. & South America Soybean/Products Balance
	United States			Argentina			Brazil
	Actual	Estimate	Proj.	Actual	Estimate	Proj.	Actual	Estimate	Proj.
	2005/06	2006/07	2007/08	2005/06	2006/07	2007/08	2005/06	2006/07	2007/08
Soybeans	thousand tonnes
Carryin	6,960	12,229	15,617	174	334	185	1,638	2,252	3,851
Production	83,368	86,770	70,358	40,500	48,800	47,000	57,000	59,000	61,000
Imports	92	246	163	1,013	2,359	2,600	40	108	130
Crush	47,324	49,160	49,941	32,748	37,600	38,100	28,756	30,770	31,800
Exports	25,579	30,428	27,896	7,130	12,208	10,000	24,770	23,805	27,900
Other	5,288	4,040	4,495	1,475	1,500	1,525	2,900	2,934	2,950
Usage	78,191	83,628	82,332	41,353	51,308	49,625	56,426	57,509	62,650
Carryout	12,229	15,617	3,806	334	185	160	2,252	3,851	2,331
Soymeal	thousand tonnes
Carryin	156	285	318	1,686	2,003	2,076	636	863	1,013
Production	37,416	39,033	39,720	25,582	29,153	29,550	22,300	23,850	24,615
Domestic use	30,114	31,171	32,024	574	620	645	10,000	11,500	12,000
Net Exports	7,173	7,829	7,743	24,691	28,460	29,164	12,073	12,200	12,713
Usage	37,287	39,000	39,767	25,265	29,080	29,809	22,073	23,700	24,713
Carryout	285	318	271	2,003	2,076	1,817	863	1,013	915
Soybean oil	thousand tonnes
Carryin	771	1,366	1,317	385	487	350	248	300	301
Production	9,248	9,292	9,614	6,169	7,200	7,320	5,521	5,910	6,105
Domestic use	8,146	8,502	8,573	402	597	1,135	3,172	3,450	3,640
Net exports	507	839	1,071	5,665	6,740	6,160	2,297	2,459	2,450
Usage	8,653	9,341	9,644	6,067	7,337	7,295	5,469	5,909	6,090
Carryout	1,366	1,317	1,287	487	350	375	300	301	316

 

USDA Export Sales (tmt) - Week of 09 May 2008
Country	Commodity	New Sales	Accum. Exports		Country	Commodity	New Sales	Accum. Exports
Canada	Soybeans	4.30	122.10		France	Soymeal	26.60	24.50
China	Soybeans	65.80	11641.80		Indonesia	Soymeal	1.10	81.60
Cuba	Soybeans	25.00	61.30		Jamaica	Soymeal	1.90	66.80
Indonesia	Soybeans	50.00	857.10		Malaysia	Soymeal	1.70	32.50
Israel	Soybeans	8.50	285.50		Mexico	Soymeal	15.70	724.90
Japan	Soybeans	3.40	2025.40		Panama	Soymeal	2.00	96.00
Malaysia	Soybeans	5.50	58.00		Philippines	Soymeal	6.80	379.20
Mexico	Soybeans	29.20	2545.60		Thailand	Soymeal	0.50	46.60
Philippines	Soybeans	2.00	39.60		Venezuela	Soymeal	17.50	198.60
Switzerland	Soybeans	0.90	4.90		Canada	Soyoil	1.70	23.30
Taiwan	Soybeans	5.30	1392.40		Mexico	Soyoil	9.10	85.80
Turkey	Soybeans	7.70	386.70
Vietnam	Soybeans	2.10	60.70
Canada	Soymeal	15.50	786.60		Export Sales Totals (tmt)
Colombia	Soymeal	1.00	254.80		Commodity	Outstanding Sales	Accum. Exports	New Sales
Cuba	Soymeal	10.00	133.70		Soybeans	3,603.00	25,484.30	201.40
Dom. Rep.	Soymeal	5.00	254.10		Soymeal	1,358.80	4,825.70	115.50
Egypt	Soymeal	8.00	60.20		Soyoil	141.50	817.90	10.80