October 10, 2012

Due to poor production in Brazil and Argentina, US soy supplies will remain tight until early 2013 but a larger-than-expected soy crop will bring some relief to the market.

The three biggest soy exporting countries - the US, Brazil and Argentina - will offer a total of 85.5 million tonnes of soy for export in the period from September 2012-February 2013, the German-based analyst forecast.

The drop in supplies from 96.43 million tonnes in the same period a year ago will require rationing of demand, it added.

"The prospective steep declines of soy crushing and net exports will enforce pronounced reductions of world consumption of soy and products, even if we assume a sharp reduction of stocks in the importing countries."

A large South American soy crop soon after February 2013 will help relieve tight global supplies after drought hit US, Brazilian and Argentine soy harvests this year, Oil World said in September.

In the US, timely rains in August as the crop was going through its critical development stage have led many analysts to raise their estimates for yield and crop size going into this week's supply-demand report from the USDA.

The US soy market, in which prices have tumbled 11% in three weeks following a drought-fuelled rally, could get some fresh price direction when the government updates crop yield and production estimates on Thursday (Oct 11).

But even a crop increase will not be enough to relieve the market this season as the world's top importer, China, has had to turn more to the US to meet its needs due to poor crops in Brazil and Argentina, Oil World said.

"US soy exports to China were unusually large for this time of the year at roughly 2.5 million tonnes in August and September but could not offset the shortfall in exports from Brazil and Argentina. China recently started reducing its soy stocks to cushion the effects of lower imports."

"With the current working estimate of a US soy crop of 75 million tonnes ... US soy stocks may have to be reduced to only around 27.5 million tonnes as of end-February 2013, a multi-year low and down from 40 million tonnes" at end-February 2012, the firm said.