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Chinese Pigs Eating Soybeans Cut U.S. Supply to 1965 Low

March 27, 2014
mississippi river barge

In the 60 years that Ursa Farmers Cooperative has been loading Midwest soybeans onto boats along the Mississippi River, business has never been this good.

Barge convoys are heading south along the world’s busiest inland waterway to New Orleans export depots at a record pace as demand surges from pig farmers in China, the largest pork-eating country. Soy stockpiles in the U.S., where farmers harvested the third-largest crop ever just six months ago, are the lowest relative to demand in at least five decades, fueling the second- biggest rally in prices to start the year since 2005.

"Our soybean supplies will be empty by the end of April," said Scott Meyer, grain department manager at the Ursa, Illinois-based terminal owner, which loads about 35 million bushels of crops annually. "Chinese demand for soybeans was a lot stronger than everyone expected this year."

The sales jump is boosting profit margins for processors including Bunge Ltd. and Archer-Daniels-Midland Co. even as costs rise for buyers including Michael Foods Inc. Goldman Sachs Group Inc. raised its six-month price outlook for soybeans on March 11, predicting "near critically low" supplies before the 2014 harvest.

Soybean futures rallied 12 percent this year to $14.4775 a bushel today on the Chicago Board of Trade, touching a nine- month high of $14.60 on March 7. Corn and wheat have rallied 15 percent. The Standard & Poor’s GSCI Index of 24 commodities advanced 2.3 percent since the end of December, while the MSCI All-Country World Index of equities slid 0.7 percent. A Bloomberg Index of Treasuries gained 1.8 percent.


Shrinking Supply


Stockpiles of soybeans on March 1 probably dropped to 987 million bushels (26.9 million metric tons), the smallest for this time of year in a decade, according to the average of 30 analyst estimates compiled by Bloomberg. Reserves will be equal to 30 percent of estimated annual use and exports of 3.319 billion bushels, the lowest ratio for this time of year since at least 1965, U.S. Department of Agriculture data show. The agency will update its quarterly crop-inventory estimates on March 31.

Since Sept. 1, shipments of U.S. soybeans climbed to 39.7 million tons, up 22 percent from a year earlier and almost reaching the government forecast for 41.64 million tons for the entire 12 months ending Aug. 31, according to the USDA. Two-thirds of those shipments ended up in China, the biggest buyer, with exports reaching 26.494 million tons, topping the previous record of 24.464 million tons three years earlier.


Pork Demand

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RELATED TOPICS: Soybeans, Marketing, Global Markets

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