September 24, 2003

U.S. Soybean Shortfall Filled By South American Bumper

U.S. soybean prices rose by 27 cents per bushel after a United States Department of Agriculture announcement that the U.S. soybean crop did not meet even analysts' lowest expectations.

Ample South American soybean yields however, put a cap on rising prices. As the second largest producer of soybeans after the U.S., Brazil has certainly capped the gain potential for the U.S. crop, an analyst was quoted as saying.

The power of South American production to undermine world soybean prices is evident in analysts' predictions that Latin American farmers will be able to easily expand their acres to fill in the lack of American soybeans.

"They have all sorts of land that can still be brought into production," said Nolita Clyde, editor of Statcom Ltd.'s canola industry newsletter. "This isn't going away anytime soon."

Oil World magazine is forecasting that Brazil's soybean crop will rise by about nine million tonnes, and its exports by four million tonnes, while Argentina's soybean crop may increase by about five million tonnes and its exports by three million.

North American farmers have their Chinese customers to thank for what would otherwise have been a flood of soybeans in the market from the side of South American supply, which would have driven prices down.  Despite record soy crops in recent years, demand outpacing supply for the oilseed has kept world stocks tight.

U.S. soybean stocks may decline about 130,000 tonnes to 3.68 million tonnes at the end of 2003-04. The USDA estimates the world carryover will fall to 34.77 million tonnes at the end of the 2003-04 crop year from 35.26 million.