Soybean Glut Ahead

November 21, 2013 08:27 PM
Soybean Glut Ahead

World stocks accumulate

By Fran Howard and Jeanne Bernick

As the U.S. soybean crop rebounds from last year’s drought and futures are 30% below the all-time high of $17.89 in 2012, Brazil is poised to surpass the U.S. as the world’s largest grower of soybeans.

South American farmers have expanded a record surplus of the most-consumed oilseed, and global output exceeds demand for the fourth time in five years.

Stockpiles used to make animal feed and vegetable oil will surge 18% to 72.4 million metric tons by September 2014, according to the average of 18 analyst estimates compiled by Bloomberg News. That will be the biggest gain in four years and the highest pre-harvest total ever.

Goldman Sachs Group Inc. says futures traded on the Chicago Board of Trade will retreat 16% to $10.50 a bushel during the next 12 months.

Brazil’s farmers doubled output in the past 12 years, accelerating the expansion as prices rose to records in 2008 and 2012.

"Brazil’s farmers doubled output in the past 12 years, accelerating the expansion as prices rose to records in 2008 and 2012."

U.S. Still Strong. For U.S. soybeans, INTL FCStone Inc. estimates total production at 3.163 billion bushels with average yields at 41.4 bu. per acre. This is slightly lower than USDA’s estimate of 3.26 billion bushels with yields averaging 43 bu. per acre.

However, Allendale Inc. estimates lower production at 3.079 billion bushels. The Swiss-based Informa also cut its forecast to 3.176 billion bushels from its previous estimate of 3.244 billion, but its production estimate is still more than INTL FCStone and USDA. The forecasting firm also reduced its 2013 yield estimate to 41.7 bu. per acre.

So what do these estimates mean for ending stocks? Allendale estimates U.S. 2013/14 soybean ending stocks at 2.046 billion bushels. This is up from the 824 million-bushel carry-out in 2012/13 and USDA’s estimate of 1.859 billion bushels.

Allendale also estimates new-crop ending stocks for soybeans to be 160 million bushels, which again is  higher than USDA’s estimate of 155 million bushels. It’s much higher than last year’s 125 million bushels.

Despite the record crop, some remain concerned about supplies. "The soybean carry-out is still tight," says Rich Nelson, chief strategist with Allendale. "The market is genuinely concerned about tight supplies." He explains that in 2010, the carry-out was much larger at 215 million bushels.

Stocks would need to climb to 300 million bushels to be considered burdensome, Nelson points out.

Record Stocks. Global stocks are projected to be at an all-time record for soybeans and the highest for corn since 2000.

The estimated world stocks-to-use ratio for soybeans is 19% for the current crop year, Nelson says. In 2010, the world stocks-to-use ratio was 20%, and in 2006 it was 21%.

USDA’s September estimate for 2013/14 world endings stocks of corn was 151.42 million metric tons, a 23% increase from last year’s 123.11 million metric tons. The estimated stocks-to-use ratio for world corn is 15%, much tighter than the 21% to 40% ratios of the 1984 to 2001 period, Nelson notes.

New-crop soybean stocks will also be much larger at 71.54 million tons, according to USDA’s latest
estimate, up 15% from last year’s 62.22 million metric tons.

However, Allendale anticipates even larger global soybean stocks of 72.44 million metric tons.

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