November 4, 2003
Rise in US Soybean Prices Seen Leading To Rationing of Global Demand
The rise of U.S. soybean prices to six-year highs in recent weeks will lead to a rationing of global demand, but top importer China's appetite will remain hearty into early next year, grain traders said on Monday.
Most importers are faced with no adequate alternative sources for soy at the moment. In a seasonal crop cycle, the United States is now harvesting while southern hemisphere titans Brazil and Argentina plant, with that huge new supply not available for shipments until March 2004.
"Rationing will take place, it has to because the U.S. will be running out of beans sooner this marketing year," said grain analyst Bill Nelson of brokerage A.G. Edwards.
He recalled in the 1995/96 year, shortage of U.S. corn crop coupled with strong demand from China rationed demand for corn, ended up U.S. livestock and poultry breeders scrambling for supplies or reducing the sizes of their herds and flocks.
Nelson said bookings of U.S. soybeans by China and other top buyers, especially from Europe, have been running above a year ago levels, despite soaring freight rates, with the weak U.S. dollar helping to offset some impact of the price gains.
The U.S. Agriculture Department early Monday said exporters confirmed contracts for 607,000 tons of U.S. soybeans to China in transactions since Friday.
USDA then said in a weekly update that China loaded 14.9 million bushels (406,000 tonnes) of U.S. soybeans in the week that ended last Thursday.
As of October 23, in the first eight weeks of the U.S. marketing year that began on September 1, China had already bought 4.447 million tons of U.S. soybeans, nearly double the 2.249 million booked in the same period a year ago; China ended up consuming a third of all U.S. soybean exports.
Analysts see China's booming economy has made for rapid growth in its livestock and poultry sectors to meet demand for more meat in diets. Processors producing soymeal as feed and soyoil and soyfoods are making solid profits, they said.
An exporter who just returned from a business trip to China emphasized the soy-based products such as cooking oil.
"I was amazed at the amount of cooking oil restaurants there use. They fry the food at your table and then throw the oil away," he said.
He said that, while there were some importers who were still buying old-crop soybeans from South America, the majority of processors were sourcing supplies from the United States.
"Importers won't be able to get beans from South America until March," he said, adding he was expecting the high prices to ration demand down the road.
U.S. farmers are not holding back, but selling actively, especially as CBOT futures rose above $8 a bushel on Friday and Monday. CBOT January closed at $7.97 a bushel, down 3/4 cent.
"There's been lots more beans coming to market," said a dealer in the CIF barge market that feeds exporters in the U.S. Gulf. He added that most exporters were fully booked for shipments in November from the U.S. Gulf to export destinations.