July 11, 2012

 

World soy supplies deficient due to US heat wave

 

 

Global soy, soymeal, soyoil supplies will be insufficient to cover demand in coming months due to the current heat wave hitting US soy following small South American soy crops this year, Oil World forecast on Tuesday (July 10).

 

"The recent demand trends of soy and products cannot be sustained in the next five to six months," Oil World said. "Demand rationing is inevitable due to insufficient world soy supplies which will reduce crushing below the year ago level in July-December and correspondingly cut global output of soyoil and meal."

 

Soy futures hit all-time-high levels on Monday (July 9) following a three week period of hot, dry weather in US grain and soy belts.

 

The US, the world's largest soy exporter, had been expected to take over an even larger global soy supply role in coming months after poor soy crops in Brazil and Argentina, the second and third largest exporters.

 

"The current US drought could become a disaster for the global livestock industry as it follows the drought-reduced South American soy crops harvested earlier this year," Oil World said.

 

"With deteriorating production prospects for corn and by the same token for distillers dried grains (by-products of bioethanol output), demand for alternative feedstuffs like soymeal will rise, explaining why soymeal followed on the heels of the corn price rally in the past five weeks."

 

The deteriorating US crop will make it more difficult for US exporters to satisfy global demand for soy, soyoil and meal in the next six months, even if US soy stocks are reduced unusually sharply, it said.

 

US September 2012-February 2013 soy exports are likely to surge to 32.0 million tonnes from 24.49 million tonnes in the same year-ago period, it said. Brazil's soy exports in this time are likely to fall to 4.40 million tonnes from 10.02 million tonnes and Argentina's to 0.54 million tonnes from 3.72 million tonnes, Oil World forecasts.

 

But total global September 2012-February 2013 soy exports are still likely to fall by 1.5 million tonnes on the year to 41.43 million tonnes despite larger US shipments, it said.

 

"This will require demand rationing or at least demand postponing in the importing countries including China," it said. "It remains to be seen to what extent China switches part of the import demand from soy to rapeseed."

 

There is potential for large Chinese rapeseed purchases at current prices which are attractive compared to soy, it said.