June 13, 2012

 

USDA predicts tighter US soy supplies on China demand

 

 

Due to growing demand from China, US soy supplies is expected to be tighter, the US Department of Agriculture said Tuesday (June 12) in its monthly supply and demand report.

 

The forecast comes as analysts have said for several months that reduced soy production in drought-stricken South America is likely to drive more export demand to the US.

 

Still, market reaction to the report was muted, as the government forecasts didn't hold any major surprises, and many traders say a USDA report due June 29 with updated US planted-acreage estimates will have a bigger impact on prices. Uncertainty about weather conditions is also currently a more important price driver, traders said.

 

"Really, the numbers weren't that big of a deal," said Chad Henderson, president of Prime-Ag Consultants Inc., a commodity brokerage based in Brookfield, Wis. "My first impression when the numbers came out was, I'd better go back and see what the weather's like."

 

The USDA lowered its forecast for domestic soy inventories at the end of the 2011-12 marketing year, which will fall on Aug. 31, to just 175 million bushels, below the average estimate of 197 million bushels by analysts in an earlier Dow Jones poll, and down from the USDA's prediction last month of 210 million bushels.

 

Farmers are exporting more soy than expected, the USDA said in its World Agricultural Supply and Demand Estimates report.

 

"Soybean exports for 2011-12 are raised 20 million bushels to 1.335 billion bushels, reflecting increased global import demand, led mainly by higher projected imports for China," the USDA said.

 

The USDA also forecast inventories of 140 million bushels for the end of the next marketing year, slightly below both the average analyst estimate of 147 million bushels and the USDA's previous estimate of 145 million bushels.

 

The USDA cut its forecasts for exports and domestic soy processing, or crushings, in the 2012-13 marketing year due to reduced available supplies and lower domestic usage of soy meal.

 

China is now expected to import 57 million tonnes of soy during the 2011-12 marketing year. That is a 1-million-tonne increase from what USDA was predicting in May.

 

However, the USDA is also predicting that Brazil--a major competitor with the US in soy exports--has a bigger crop than expected and is exporting more.

 

The USDA on Tuesday (June 12) raised its forecast for Brazilian soy production to 65.5 million tonnes for 2011-12, up from 65 million, and in line with analysts' expectations for a forecast of 65.6 million tonnes. The forecast for Brazil's soy exports is now 36.7 million tonnes, a 1-million-tonne increase from USDA's May forecast.

 

Meanwhile, the USDA didn't change its forecast for US corn inventories to be 851 million bushels at the end of the current marketing year. Analysts had expected a cut to 828 million bushels.

 

The USDA raised its forecast for domestic corn use in ethanol in the current marketing year by 50 million bushels, to 5.05 billion bushels, saying weekly ethanol production has increased since mid-April after declining from the record levels of late December.

 

But the USDA also cut its forecast for corn exports in the 2011-12 year, due to tight domestic supplies and increased competition, especially from Brazil. The USDA forecast exports of 1.65 million bushels, down 50 million bushels from its previous forecast.

 

The USDA also left unchanged its forecast for corn inventories at the end of the 2012-13 year, at 1.881 billion bushels. Analysts had expected a forecast of 1.74 billion bushels.

 

Cotton for July delivery on ICE Futures US was trading 0.2% higher at 75.26 cents a pound. Prices have dropped more than 17% so far this year.