November 2, 2010
Hopes for US rebuild of soy stocks spoiled by China
Soy stocks in the US, which had initially been expected to more than double this season, may not rise at all thanks to China's hunger for imports, Australia & New Zealand Bank said.
The record 16.7m tonnes of American soy that China has booked so far for 2010-11, represent two-thirds of the figure that the USDA is predicting for the whole season - which has a further 10 months to run.
To hit the USDA target would require sales of just 140,000 tonnes per week - a marked slowdown on recent sales levels of two million tonnes a week.
In fact, just assuming export sales at last season's rate, of 212,000 tonnes a week, was enough to wipe out any prospect of significant lift in US inventories this season. Such a rate would mean that the US balance sheet would have to tighten significantly, ANZ said.
The bank had calculated the crop's stocks-to-use ratio - a key measure of the availability of supplies, and therefore the prices they can command - at 4.5%, compared with the current USDA estimate of 8.0%.
"One key revision the market will be watching is the extent to which the USDA increases US soybean exports for 2010-11," the bank said.
However, some other observers have proved cautious over China's imports, ostensibly being supported by form crushing margins and rising demand for livestock feed.
Analysts said that the import spree may be down to a temporary stockpiling exercise to insure US supplies, in the event that South America's crops are struggling.
South America, the other major source of soybean exports, suffered a worryingly dry start to the sowing period in what is a La Nina season, which many believe could spell poor crop weather.
"We assume that it is in the interest of the Chinese government and the major players to further accumulate stocks of imported soy as a hedge against weather-caused production problems in South America in recent months," analysts said.
The concerns were echoed by another analyst who said that China was continuing to overbook US soy as an insurance hedge against dry planting conditions in number-two world soy producer exporter Brazil.
"Weather forecasts suggest a chance for a measurable rain in Brazil this weekend and that could kickstart delayed planting in the central and northern regions", the analyst said.
