January 19, 2015


Soy glut feared as world output forecast raised to 314 million tonnes



The specter of a soy glut is seen after the US Department of Agriculture's (USDA) has raised its forecast for world output of soybean crop to 314.4 million tonnes, which is up 1.6 million tonnes, due to US and Brazilian gains.


According to the USDA's World Agricultural Supply and Demand Estimates (Wasde) published last week, US soy stocks are at their highest level since 2006. "We haven't seen a situation like this in years. It is almost a double whammy with the US soy crop being revised upwards, along with simultaneous higher expectations for the Brazilian soy harvest", it said.


The Brazil soybean crop is projected to rise by 1.5 million tonnes to a record 95.5 million tonnes, on higher projected yields for Mato Grosso and Parana farmerfs.


The potential soy glut, along with the confidence in the security of supply, is bound to put downward pressure on prices.


Already, the corn and soybean prices moved lower, on January 12, after the release of the Wasde and the quarterly grain stocks.


Jack Watts, lead analyst for cereals and oilseeds of the Agriculture and Horticulture Development Board (AHDB) Market Intelligence, said the demand for soy from China, which accounts for about 2/3 of the world's soybean trade, is critical to market fundamentals.


China's increased demand for soy is largely due to its rising consumption of soybean meal used to feed livestock. This means the average Chinese is continuously increasing his average consumption of meat and poultry as a consequence of increasing purchasing power.


Data from the General Administration of Customs of China showed that in 2014 China imported 71.4 million tonnes of soy, up 12.7% from 2013.

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