The $1 a gallon tax credit for biodiesel will run through 2013 ata cost of more than $2 billion under legislation passed by Congress to avoid the so-called “fiscal cliff.” In reviving the credit, lawmakers made the extension retroactive to its expiration at the end of 2011. It is now set to expire at the end of this year.
•During November, China the worlds largest soy buyer, imported 4.16 million tonnes of soybeans due to seasonal demand on the rise and crush margins improving. During the first 11 months, imports stood at 52.49 million tonnes which is up 11.4% on the year.
•Crush is so rapid that supply is beginning to outstrip demand, at least domestically. Livestock producers also have culled herds due to record-high animal feed prices. The hog slaughter in October was the largest ever and the U.S. cattle herd the smallest in 60 years.
•Chinas preliminary PMI for December rose to a 14 month high of 50.9 verses 50.5 in November showing that the factory output is showing signs of improvement and recovery.
•During the next 10 days Argentina and Brazil should see idea and beneficial weather. Argentina is expected to remain dry with a little bit of rain received next week. Brazil will see rains throughout the country and this will provide beneficial moisture.
•The BA Grain exchange reported that since farmers have received idea weather the past two weeks, planting by sowing is now 9.4% complete and the year on year delay is now reduced to 9.6%.
The International Longshoremen’s Association, which represents 14,500 workers at 15 container ports and the U.S. Maritime Alliance of shippers, terminal operators and port authorities, have agreed to extend their current contract by 30 days to finalize details that will avert a strike that threatened to wreak havoc on the U.S. economy.
•The drought hit Mississippi River will stay open to commerce a few days longer than expected following the release of water from a lake in southern Illinois. The U.S. Army Corps of Engineers for the second time released water from the Carlyle Lake into the river to aid transportation.
•Some farmers have started harvesting what is expected to be a record soybean crop in Mato Grosso. Beans from Mato Grosso account for about one third of Brazil’s crop and are expected to help replenish low global stocks.
•The USDA reported cancellations of 315,000 metric tons of soybeans to China during the 2012/2013 marketing year. The USDA also raised it soybean production estimate by 1 millions tons to 83 million tons.
•Soybean output in No. 4 global exporter Paraguay could hit a record 8.6 million tonnes this season. That would be good news for consumer nations punished this year by soaring grains prices as drought hit U.S. harvest failed to keep pace with demand.
Oil World reports the U.S. may be facing tight domestic supplies because of the current export sure of U.S. soyoil. Global soyoil buyers have turned to the U.S. for purchases in past weeks largely because of tight South American supplies following poor soybean crops in Brazil and Argentina earlier this year.
•Analysts at FCStone reduced their forecast for Brazil’s 2012/13 soybean crop by 2 percent, citing lower yield expectations due to dryness in the southern producing regions. The consultancy said Brazil will likely produce 80.01 million tonnes of soybeans, down from its September estimate of 81.98 million tonnes.
•The EU is raising soybean imports from the US, Ukraine, and Canada because of increasingly tight supplies from South America. US soybean exports sales to the EU in the 2012/13 season up to Nov. 22 were up 1.03 million tonnes, up from .2 million tonnes the same time a year ago.
•Stats Can released their Dec production at 13.31 mil MT down from their Oct estimate of 13.359 mil MT and well below last year’s 14.6 mil MT.
•Some freight companies have pulled their barges from the mid-Mississippi and Illinois Rivers until March as low water after a severe drought disrupted business during the peak of the grain export season, industry sources said on Wednesday.
•The situation is now worse since the amount of water will be reduced that flows into the Mississippi from the Missouri river. Governors, senators, and shipping groups are appealing to President Obama.
India’s Food Minister has rejected a proposal to increase import duty on edible oil. India is the world’s largest importer of edible oil. India’s edible oils imports during 2011-12 (Nov -Oct) witnessed a sharp rise of over 19% to 9.98 mln tn.
•Paraguay's Senate approved a bill that would impose a 10% tax on soybean exports despite objections from farmers. The bill seeks to support the country’s nascent soy-crushing industry by encouraging the export of value-added by products such as soymeal and soy oil rather than beans.
•Malaysian palm hit another record high in November as exports failed to keep pace with output. Inventory has grown 2.8 percent to 2.58 million tonnes from a previous record of 2.51 million tonnes seen in October.
•China’s use of wheat for animal feed is estimated to rise by 6% in 2013 to 12.4 million tons. Wheat production and consumption is expected to rise in 2013 potentially limiting the use of soymeal for feed.
•The StatsCan report confirmed that corn and soybean production set record highs this year due to favorable weather in the east which contributed to bigger yields.
•The Brazil's government held its forecast for a record soybean crop of 82.6 million tonnes on Thursday, brushing off concerns over dry weather in the southern producing regions.
Soybean stocks will be as low as 49 million tons in the beginning of 2013 which would be down 21 million tons from last year. The South American crop has little room for error, and prices could be considered undervalued, not reflecting any risk yet.
•Oil World analyst on Tuesday cut the Argentine and Brazil harvest by a combined 3 million tons. Argentina is projected to harvest 54 million tons and Brazil is projected to harvest 81 million tons.
•The United States is expected to export 80% of their soybean supplies by February 2013. With low stocks and supplies at that time, the world will urgently rely on South America come March 2013.
•FOB soy oil out of the gulf has become more completive relative to South American origin, crush in Brazil and Argentina are slowing down due to tight supplies. U.S. sales have been on the rise supporting the price of soy oil.
•15 U.S. Senators, 62 members of House of Representatives, and the governors of Iowa, Illinois, and Missouri have written letters to the White House and Federal Emergency Agency requesting that river-bottom rocks be removed immediately. The low water from the drought causes a threat to commercial boats and if closed from December-January, transportation of $7 billion would be lost.
•Logistic jams and transportation delays anticipated in Brazil early next year will likely slow the flow of a record soybean crop to buyers around the world. "Brazil is not prepared for this harvest, we urgently need to resolve our logistics problem," said Antonio Alvarenga, head of the Rio de Janeiro-based National Agriculture Society.
China’s use of wheat for animal feed is estimated to rise by 6% in 2013 to 12.4 million tons. Wheat production and consumption is expected to rise in 2013 potentially limiting the use of soymeal for feed.
•Unlike Argentina, Brazil appears to be in very good shape while central Brazil is expected to receive moisture this weekend.
•The Argentine Agriculture Ministry says the country can produce 55 million to 58 million tons of soybeans this crop year if the weather cooperates. The government also marked down the corn area last week to 4.7 million hectares from a previous 4.97 million, while it kept the country's projected soybean area at 19.35 million hectares. In times of bad weather, Argentine growers often shift toward more resistant and easier to grow soy.
•Meteorologist said in Argentina that, “ Argentina's main farm areas have benefited from good weather last week and over the weekend, helping growers advance soy planting that has been delayed by months of heavy rain and flooding.”
•On Tuesday German oilseeds industry association UFOP forecasts that Germany’s winter rapeseed sown area for the 2013 harvest has been expanded by 9.1 percent on the year to 1.419 million hectares. About 75 percent of Germany’s rapeseed crop is used for biodiesel feedstock, the remaining 25 percent as food.
Late last week, StatsCan reported canola production at 13.4 million MT which was down about 2 million MT from August and well below market estimates. Canola yields continue to be disappointing for this current crop year.
•Currently, farmers in Brazil have sold 49% of new crop compared to 36% at this time last year. However, sales have slowed down dramatically ever since prices in Chicago have dropped after reaching all time highs in September.
•Soybean imports in Vietnam are rising dramatically as livestock numbers are growing and domestic food consumption is getting bigger. Their own harvest is expected to grow by 50,000 tons .
•The Chinese government will start stockpiling soy and corn from local farmers at higher prices than a year ago, an industry source said on Tuesday, a move set to stabilize domestic prices and support soy imports. With prices 4% above imported prices, this should keep crushers enthusiasm for imports alive.
•The threat of closure on a critical stretch of the Mississippi river has raised export prices for corn, soybeans, and wheat as access to the gulf has become limited and shippers are worried they will be unable to source supplies from the Midwest.
•On Thursday, the USDA reported that 32,000 tons of U.S. soybean oil was sold to an unknown destination for 2012/13 delivery.
South America received rains this past week which helped pick up planting pace in key states. 58% of the soybean crop is now planted which is up 14% from last week and on pace with last years plantings.
•Throughout the week, CBOT soy complex futures have declined severely. The USDA’S report last Friday has caused a bearish look on the soy complex as the shortage of supplies is less severe after the report. November soybean futures were at their lowest in 4 months on Monday.
•As of Friday morning, China cancelled 10 soybean cargoes for December to January delivery. The cancellation was due to crushers running at losses and Chinas domestic demand for soy oil and meal stays sluggish. There continue to be concerns about Chinas weakening economy.
•Much needed warmth and dryness benefited Argentina for most of the week, helping dry the fields for soybean planting. While in Brazil, beneficial rainfall has helped increase moisture for soybeans.
•On Tuesday German oilseeds industry association UFOP forecasts that Germany’s winter rapeseed sown area for the 2013 harvest has been expanded by 9.1 percent on the year to 1.419 million hectares. About 75 percent of Germany’s rapeseed crop is used for biodiesel feedstock, the remaining 25 percent as food.
On Friday, the USDA raised their bean export number by 80 million bushels due to the strong bean export numbers in October. This week export inspections came in at 59.4 million bushels. As of this week, exports are at 369.6 compared to last years 260.2.
•On Monday, the Brazilian crop was revised by Celeres which estimated the crop at 79.02 million MT verse 79.1 million MT in October. 81.2 million MT is what the market currently projects. The protected 79.02 is up 8.4% from last year as farmers plant more soy than corn due to higher prices for the oilseed.
•The trade unions of Greece went on strike for the 3rd time in 6 weeks. This is due to the potential bailout the lawmakers are voting for. If the 4th Austerity package in 4 years is not granted, then Greece will most likely have to step out of the euro.
•Due to the excessive rains in Argentina, there could be a possibility that the current soybean crop could be 4-5 million MT below the current estimate of 56 million MT.
•Brazilian farmers have planted 37% of the soybean crop compared to 48% at this time last year. Heavy rains in Rio Grande which is the number 3 producing state and dry weather in the top producing state have caused these delays.
•So far, farmers have collected $3.6 billion in indemnities that ultimately could hit $25 billion. So far, “Odds are against a 5 year farm bill unless its part of a budget agreement and a budget deal is unlikely.” says Pat Westhoff.
The weather change that took place last weekend in South America was beneficial to famers. In Argentina, drying occurred and northern Brazil received heavy rains they desperately needed. Favored weather moving forward will help favor record production that is supposed to occur in South America.
•The USDA revised the U.S. soybean crop and added 111 million bushels which was 79 above market estimates.
•China soybean imports are only projected to increase by 5-6% the next 5 years which would be down from the past 4 years double digit growth. According to Sinograin, Chinas reserves of bean and rapeseed oil are so large that the government can stabilize prices.
•On Thursdays, Brazils government bumped up its forecast for the 12/13 crop at 80.1-83 million tonnes. The concerns of dry weather and delayed planting appear to be over.
•Prices in the soy complex continue to fall from their peak as hopes for larger than expected U.S. production and forecasts for huge increase in South America soy harvests.
•Palm prices must decline in the next 2 months to lure buyers to cut back inventories and to switch other vegetable oil demands. Prices must stay around 2,200 ringgit a tonne to stimulate demand. Prices have fallen about a quarter this year to trade around 2,400 ringgit.
Due to record high prices this summer in corn and soybeans, farmer revenue is expected to be at its highest in quite some time. U.S. crop insurance programs are projected to pay out $20 billion this year to farmers.
•Chinas AgMin has estimated China soybean imports at an all-time record of 57.5 million tons which is up 9.3% from last year.
•Chinese demand for US beans continues to be strong. Many believe that the Chinese bean crop is much smaller than 12.6 million MT which is what the USDA shows. Their crop could be more like 10 million MT which would increase demand even more export demand from China
•“Imports of soyoil will again be very high in Oct./Dec. 2012 and may reach at least 110,000-120,000 tonnes, more than double the 41,000 tonnes a year earlier, of which 100,000-110,000 tonnes (will come) from Argentina. Argentina exported 129,000 tonnes of soyoil to Iran in July/Sept 2012, up from 67,000 tonnes in the same time in 2011,” Oil World said.
•Due to heavy rains in Southern Brazil and Argentina, a 30% increase in soybean production is being questioned. According to Oil World, “excessive rainfall has been revived on 50% of Argentina's oilseed and grain area.” If consistent rain continues to disrupt farmers, look for headlines in November to be about soybean planting delays.
•The USDA reported on Wednesday that 25,000 tons of soyoil was sold to China for 2012/2013.
On Thursday, Northern and Central Brazil received beneficial rains that gave them relief from their monthly hot and dry conditions. Argentina received non- beneficial rainfall this week but the 10 day forecast shows drier and warmer weather.
•Spain has reported that their economy has weakened for the 5th straight quarter. Mario Draghi will address the parliament to convince Spanish authorities to seek financial assistance from the European Commission (EC), International Monetary Fund (IMF), and the European Central Bank (ECB).
•The Rosario Grain Exchange in Argentina estimated that Argentina soybean acreage for 2012/2013 was 19.5 million HA which is up 3.7% from 2011/2012.
•Chinas AgMin reported that soybean imports in October were 4.22 million tons which is down from Septembers 4.97 million tons. The November projection is rather bearish at 2.50 million tons.
•FCStone estimated 2012 U.S. soybean production at 2.959 billion bushels which was up from 2.849 billion last month. Soybean yields were estimated at 39.1, which was up from 38.2.
•U.S. soybean futures fell 2.2% on Monday, which was the biggest daily slide in almost a month. This was mainly due to an optimistic forecast across Central Brazil and people not taking any risk and uncertain about Hurricane Sandy’s impact.
During last Fridays trading session, Informa released their 2013/2014 planting estimates. Bean plantings were increased to 79.99 million acres which is slight up from 79.87 million acres. Production was raised to 3.453 billion bushels compared to September which was 3.449 billion.
•The soy complex was lower on Tuesday due to the positive crop outlook from analyst firm Safras e Mercado which raised the production of beans to 82.5 million tonnes from 82.3 million tonnes in July. Bean plantings are now 19% complete compared to the five year average of 12%.
•The very attractive price of palm oil is giving buyers more incentives to buy. However, palm oil prices are expected to rise in the next few months due to importers seeking alternatives to more expensive products like soyoil. Price of crude and processed palm has already recovered by $30-$40 in the last two weeks.
•Ranchers and cattle producers are being advised by Brazilian farmers to free more land by consolidating their herds to free up more land for the potentially the largest soybean crop ever. Other ranchers and cattle producers are pushing steers into feed lots so they can fattened more quickly which is also expanding soybean acres.
•This week, China has only sold 10% of their soy reserves due to high prices. Bidding prices of 4.500 yuan per tonne ($720 US)which is before freight and additional cost. These prices are in the same range as domestic and imported soy.
Agriculture officials met on Monday to discuss the USDA’S quarterly figure for U.S. corn stocks which was 988 million bushels on September 28 compared to the estimate of 1.181 billion bushels on September 12. These estimates the last two years have caused extreme volatility in the futures market.
•On Monday, bean export inspections came in at 61.42 million bushels (China= 47 mill) which was above trade expectations of 40-50 million. We are now at 242 million bushels compared to 158 a year ago.
•On Wednesday the USDA reported a large sale of 105,000 MT of beans for 12/13 followed by another announcement on Thursday of 120,000 MT sold for 12/13.
•Additional heavy rainfall is expected in the week of Nov 2nd which will further delay planting. In South America the plan was to deliver large quantities of early crop beans in Jan or early Feb 2012. This can not materialize because of later than intended sowing in the soybean growing areas, keeping the dependence on US soybeans and products for longer than desired time.
•This seasons reduced canola supplies are dwindling rapidly. Disposals have been front loaded in Aug/Oct 2012 with crushing's up by at least 170 Thd T and exports close to the record level of a year ago until early Oct. China reportedly was an active buyer of Canadian canola during the past two weeks.
•Soybean harvesting has begun to slow down. Reducing the pace of new crop arrivals and thus supporting domestic cash markets.
According to Minas Gerais, Brazil has sold 99 percent of the 65-million-tonne 2011/2012 crop that ended harvest in May, unchanged from a week earlier and above the 92 percent sold by this time last year. New crop sales held steady this week at 47% and only 29% of new crop was sold at this time last year. However, sales have slowed down in Brazil since prices have dropped recently.
•This winter is likely to continue a U.S. warming trend that could make 2012 the hottest year ever. Dryer than usual winter weather is expected in much of the Northwest, with higher than normal precipitation predicted for the Gulf Coast according to NOAA forecasts.
•If the biodiesel credit gets reinstated for 2013, biodiesel production would use another 300-400 million pounds of vegetable oils which would tighten supplies for traditional food users.
•September NOPA crush was reported at 119.7 million bushels which was higher than 2011 which was 110.3 million bushels.
•Harvest disruptions are expected to continue throughout this weekend with rains being forecasted in Indiana and Ohio which have had a slow harvest.
•The decline in Chinese soybean production this year has further aggravated global supply tightness putting a bigger emphasis on the South American crop and weather.
•In Argentina and Southern Brazil, excessive moisture has delayed plantings of soybeans , and many areas in central Brazil are to dry.
A cold front from this past weekend in southeastern Brazil brought light rainfall to the countries main soy belt. The central part of top-producing state Mato Grosso has received 125 millimeters of rain so far this month, compared with 155 millimeters on average for the whole month of October, according to Somar, though only 10 millimeters have fallen on the southern part of the state.
•According to Celeres, Mato Grosso has planted 15% of the soybean crop, compared to 5% a week earlier, and 12% at this time last year.
Oil World said on Tuesday that, “ sizeable declines in world export supplies of sunflower oil, rapeseed oil, and soybean oil will raise the global dependence on palm this year.” The current large discount of palm oil compared to other oils will shift demand in favor of palm oil.
•On Wednesday, China National Grains Center said, “China, the top importer of soybeans, is expected to import 12% less to 12.8 million tonnes. The August forecast was a 10% decline to 13 million tonnes. This is due to a larger output for corn, they are expected to import 201 million tonnes which is a 4% increase.
•The South American crop is expected to recover by 36 million tonnes or 31% from the drought in 2012, assuming an increase of 11% in harvested acres and 20% in the average yield.
Sparse rainfall has slowed planting of what is expected to be a record soybean crop in brazil. Cumulative rainfall has been stuck at around 70 millimeters in key areas of Mato Grosso, not enough to saturate soils after an unusually dry August.
•Oil World reported the three biggest soybean exporting countries – USA, Brazil, and Argentina – will offer a total of 85.5 million tonnes of beans for export in the period from September 2012 to Februry 2013. The drop in supplies from 96.43 million tonnes in the same period a year ago will require rationing of demand.
•"U.S. soybeans exports to China were unusually large for this time of the year at roughly 2.5 million tonnes in August and September but could not offset the shortfall in exports from Brazil and Argentina.
•Heavy rainfall has continued for the first nine days of October in Buenos Aires, Entre Rios, and parts of Santa Fe which is questioning timely plantings of summer crops. Rainfall received in October has been two-three times the normal amount, keeping fields wet.
•The weekly jobless report is now 339,00 people which is down 30,000 from last week and is now at the lowest level in 4 years. This shows evidence that the economy is improving and this supported futures during Thursdays trading session.
•On Monday, harvest is expected to be 70% complete. Harvest pressure should start to descend and we should see post harvest rallies occurring in the next few weeks.
According to Reuters, Paraguay’s central bank raised its outlook for 2013 economic growth to 9.5 percent from 8.0 percent citing an expected jump in soy and grains output.
•Government supply agency Conab reported, Brazil will produce up to 82.8 million tonnes of soybeans in 2012/13, this is the largest crop ever and 25 percent more than in the previous season. Area planted with soybeans is seen at a record of 27.33 million hectares, compared to 25 million hectares a year ago.
•China, the world’s top soy importer, will continue state soy sales on Oct 11 by offering 400,000 tonnes from state reserves in a bid to boost supplies and contain food inflation. Traders have said they except Beijing to carry on selling soybean reserves well into 2013 to help ease tight supplies caused by the worst drought in decades in the United States.
•U.S. farmers are expected to have harvested 70% of soybeans after another week of favorable weather. Last week the USDA said soybean harvest was 41 percent finished. Following a summer during which crops withered as a result of the drought, farmers started the harvest earlier than this year and had been gathering at a record pace throughout the fall.
•The U.S. harvest is turning out better than expected, causing soy prices in Chicago to fall 11% in just three weeks. Global supplies will be tight until expected bumper crop from Brazil and Argentina are ready for export in January or February.
The market expects that the recent fall in Chicago prices will motivate China to increase their soy imports. Chinese crushers have not bought enough and they will need to increase their purchases soon.
•Only 11 million tonnes of beans have been purchased by Chinese soy crushers from September-February which is less than half of their needs for this period.
•In the first half of the 2012.2013 season it is possible that 83% of US Soybeans available for export have already been sold. This could potentially create high prices if a country continues to buy for the September-February time frame.
•According to Oil World, “Soybean prices have appreciated since the release of the bullish U.S. soybean crop estimate on September 12, and it is possible that US soybean futures make a new high and pass $18 per bushel in the next two months.
•US February 2013 soybean stocks are expected to fall to 25.10 million tonnes compared to last February which was 39.30 million tonnes.
•If the U.S. increases imports in the near by months, logistical problems could be created since the U.S. is export orientated.
•On Saturday , the busiest lock on the Mississippi River was shut down when a crew found damage to one of the lock’s protection cells. As of Thursday it remains closed and $2.5-$3 million dollars in revenue is being lost each day and shipments of grain and other commodities are being delayed. The Mississippi River ships roughly 55%-65% of corn and soybeans to the U.S. Gulf.
•September to December imports from Brazil and Argentina are expected to be reduced by almost half from a year ago which averaged 8.2 million tonnes. All export demand should come to the United States.
According to Reuters, “China will continue to sell soybean reserves well into 2013 in order to contain food inflation and ease tight supplies caused by the US drought. On average, the government has been offering 800,000 tonnes a month of soybeans from their reserves.”
•The United Nations Food and Agriculture Organization fully supports a call by France to develop strategic grain stocks to counter price volatility. Due to high prices and the recent drought the FAO hopes to encourage countries to raise production.
•Oil world estimates that the U.S. will import 1 million tonnes of soybeans in Sept 12-Aug 13 while Canada and South America would be the major suppliers.
•In early 2013 a large South American soybean crop is expected to receive strong export demand which would help relieve tight global supplies caused by droughts in the U.S., Brazil, and Argentina.
•Brazil’s 2013 soybean crop is expected to rise to 82.0 million tonnes compared to 66.4 last year and Argentina’s will increase to 56.0 million tonnes from 40.5 million tonnes.
•14 analysts polled by Reuters, estimated a soybean yield of 35.85 bushels per acre which is up from the September USDA report of 35.3 bushels per acre. So far this year, soybean yields have been following soybean crop ratings consistently; therefore adding 1 bushel per acre to the USDA sheet is very legitimate due to the weather and recent rains.
•Argentina will apply a sliding scale tax to its multibillion dollar biodiesel export industry. Many believe that this could put smaller producers out business resulting in a lager oil supply.
Soybean prices remain close to a record high hit on Aug. 30 caused by concerns about drought devastation to the U.S. crop, following similar drought damage earlier this year to major exporters Brazil and Argentina.
•Informa released their corn and soybean production forecast on Friday, indicating an expectation on corn production of 11.0 bln bushels at a yield of 126.50 bpa. Their forecast on the soybean crop is 2.690 bln bushels on production and 35.4 bpa on yield.
•Stats Can further ratcheted down their expectations on ending canola stocks to 788K MT down from expectations of 1.0 MMT and July’s previous number of 2.2 MMT.
•Although hit by drought in their current crop year, Russian president Vladimir Putin indicates that they intend to double their capacity to export by 2020.
•Argentine farmers are expected to plant 3.4 MM hectares of corn, which would be 300K hectares more than the previous estimate, taking acres away from soybeans.
•A late summer cold front is pushing into the Midwest and Delta and could hamper further harvest progress, but improve drought stricken soils in front to winter wheat planting.
•As a response to global food security, Reuters reports that the G20 will discuss the dramatic rise in world food prices and its impact at a food summit in Russia in October.
•Low water levels and the lingering effects of Isaac are expected to hinder traffic on the Mississippi river and industrial utilization at many of the port facilities on the gulf -- many for several weeks going forward.
“U.S. soybeans slid over 1 percent on Wednesday, notching the biggest one-day drop in three weeks as the harvest in the Midwest farm belt got underway and on profit-taking a day after prices set an all-time high near $18 per bushel.
•According to Reuters barge draft restriction on the lower Mississippi River were eased slightly this week. The U.S. Coast Guard updated its safety advisory on Monday for the lower Mississippi to allow barge drafts of 10 feet, still below normal drafts of 12 feet or more but up from the 9 foot limit that had been in place for more than a month.
•On Friday, the U.S. government released their monthly jobs report which showed that only 96K jobs were added last month , but that was well below expectations of 135K. Unemployment dropped to 8.1%, but this does not take into account job seekers who have given up on their search.
•Weekly export sales were disappointing indicating bean sales of 560.6K MT compared to estimates in the 625-700K range. Meal and oil export sales also came in below expectations.
•The palm market continues to liquidate, on concerns of an anticipated bearish production and stocks report and dismal exports.
•Jefferies is on one of the few private crop estimators out there having an estimate in the higher end of the range at 36.25 bpa on beans. They indicate most improvement came in the southern plains where Isaac was able to stabilize the crop.
•Poultry and hog producers continue to face margins in the red due to continued high feed costs. Expect continued liquidation and herd drawback until this problem fixes itself, which we don’t anticipate to be anytime soon.
The same Reuters Poll mentioned in the bullet to the left pegged the national corn yield at 121.5 bushels per acre, which is almost 2 bushels per acre below the USDA’s August estimate. The analysts and traders polled also projected that only 85.9 million acres would be harvested, putting total production at 10.5 billion bushels, which is about 280 million bushels below the USDA.
•Statistics Canada reported this week that Canada is only expected to produced about 15.4 million metric tonnes of canola this year. While this is still more than last year, the market had been expecting production of about 16.4 million metric tonnes. If we assume about half of that 1mmt deficit was to be crushed, it would mean about 500 mil lbs of less canola oil available this year (the US is Canada's biggest oil customer).
•In the week straddling the August 10th USDA report, the CFTC reported that Speculators bought nearly 20,000 soybean oil futures and options, but only about 3,000 soybean futures and options. This tells me that the market is now realizing that we don’t just have a problem in beans, but also a problem in oil.
•Many traders were eyeing the release of the Federal Reserve meeting minutes this week which showed a willingness by the Federal Reserve to pump more money into the economy if they didn’t see signs of improvement soon. More money means more investors looking for a place to put their money, and right now agriculture has a pretty appealing story.
•The Pro Farmer Tour released their yield estimates on Friday, and both came out on the low side of expectations. The Tour projected that soybean yields would be 34.1 bushels, giving an expected production of 2.6 billion bushels. They pegged the corn yield at 120.25 bpa, giving a total production of 10.478 billion bushels. Both of these estimates are below the USDA estimates.
A Reuters Poll of traders and analysts this week showed the market is expecting a national soybean yield of 36.6 bushels per acre, or about 0.5 bpa above the USDA’s August estimate. At the same time, they reduced their estimate of harvested acres, but their overall estimate increased production to 2.713 billion bushels, which is 21 million bushels higher than the USDA estimate.
•One of the biggest bearish factors on the market right now is that fact that so many people are bullish. Over the last few weeks we have been inundated by stories in the USA Today, morning shows, NPR, ect... I believe it was Joe Kennedy (maybe) who said that he knew to sell his stocks before the Great Depression because the guy shinning his shoes gave him stock advice.
•Soybean ratings have been ticking slightly higher over the last couple weeks, indicating that a recent break in temperatures and moderate rainfall might have been enough to stave off disaster in the soybean crop. While the total crop size is still uncertain, better weather has caused some to start planning for a “really bad” crop instead of a “disaster” crop.
•On a global basis, the spread between soy and palm oil remains exceptionally large. On a US-Malaysia comparison, palm oil is about $260/metric tonne cheaper than soybean oil. Some people are saying that while this price discrepancy exists, it makes no sense for bean oil prices to rally higher, because palm oil should steal that demand through its much lower price.
•Brazil’s grain industry association Abiove said this week that they expect soybean production in Brazil to reach 81.3 million metric tonnes, up significantly from the 66.6 MT this year.
Some believe it will he hard for China to materially shrink their soybean imports this year because their own domestic soybean is reported to be down over 9% year on year.
•New crop soybean sales were 924,600 MT last week, which is nearly four times the new crop sales reported in the week prior, and 2.5 times more than the four week average. Outstanding export sales for the 2012/13 marketing year are now about 16.2 million metric tonnes, and at this time last year outstanding sales were for the next marketing year were only10.455 million metric tonnes. The reason this is important is because for the 11/12 marketing year, the USDA estimates the US will export 36.74 MMT of soybeans, and in mid-August last year we had sold just under 30% of that total. For the next marketing year, the USDA thinks we will have just 30.2 million metric tonnes of exports, meaning we have already sold over 50% of them.
•Talk is increasing that the USDA balance sheet for the soybean complex is unsolvable, meaning they are likely understating demand. Some think that the poor corn crop will lead to a lower ethanol grind, which means less DDGS will be produced. If this happens, it means more soy meal will be needed, meaning more soybean crush. With ending stocks for beans next year at absolute lows, any additional crush would have to come from bean exports (see note above). What this leads to is a thought that soybean prices are not high enough currently to adequately ration demand.
The National Oceanic Atmospheric Administration said this week that a weak-to-moderate El Nino will likely form in August or September of this year. El Nino could create favorable planting conditions in South America.
•Recent trade estimates for Chinese soybean demand show that demand destruction could already be occurring. Analysts polled by Reuters showed that fourth quarter imports by China could fall by 20% compared to a year earlier as China tightens up their pipeline as they wait for a larger South American crop in March.
•Old crop soybean export sales reported this week were just 97,200 MT which was a marketing year low. Old crop meal export sales were also lower, declining 60% week on week and 65% from the 4 week average.
•Old crop export sales for soybean oil this week actually showed a reduction of sales as Nicaragua reduced its purchases. Oil exports last week were 4,900 MT, which is down 90% from last week and 80% from the 4 week average.
•Net sales for the 12/13 marketing year of soybean meal were 78,000 MT this week, which makes total outstanding sales 1.189.5 million metric tonnes. At this time last year, sales for the next marketing year were only 535,600 mt, so this means exporters are slated to crush twice as much next year based on meal exports alone (this of course can change if export sales slow down, but this is just what the sales say as of this week).
Oil World estimated this week that Brazil’s soybean stocks as of August 1st fell to 20.8 million metric tonnes (764 million bushels), compared to 33.15 million metric tonnes (1.218 billion bushels) on Aug 1st, 2011. They also believe that Argentine bean stocks as of Aug 1st were 22.66 million mt (832 mil bushels), compared to 30.62 million mt last year (1.125 billion bushels). Stocks in Paraguay have more than halved year on year, now estimate to be just 1.75 million mt, down from 3.88 mmt last year.
•This week Informa cut their 2012/13 corn production estimate to 11.224 billion bushes, using a yield of 131 bushels per acre. This is down from their estimate of 11.5 billion bushels and a yield of 134 bpa last month. More shockingly, Informa said they expect the USDA to post a 120.7 bpa yield, leaving production of just 10.338 billion bushels. If their USDA estimate is realized, it would make a disaster out of a disaster. 11 billion bushels is a strong psychological support for corn.
•For soybeans, Informa dropped its yield to 37.2 bushels per acre, down significantly from their estimate of 38.5 bpa just a couple weeks ago. Informa did not release an estimate for what they think the USDA will post for soybeans.
•New crop soybean bookings last week were 195,200 MT, which was lower compared to the week prior’s 275,900 mt of new sales, although that week also saw over 200k mt of cancellations/buybacks. Outstanding soybean sales for the next marketing year now stand at 15.32 million metric tonnes, compared to just 10.26 million metric tonnes at the same time last year.
•Argentina announced this week that they are raising their tax on biodiesel exports from 20% to 32%. Argentina is the worlds largest exporter of biodiesel. This could force importers to look elsewhere for both biodiesel and feedstock.
The Chinese government has released some soybeans from state reserves, and is rumored to be planning more releases in the future in an effort to ease domestic food prices. More reserve releases would lessen demand from China for US beans, and could buy them some extra time until the South American harvest.
•Over the weekend, much of the corn belt received at least some rain, with some localized totals in Iowa nearing two inches. Coverage was estimated to be just over half in most growing areas (with avg totals around 0.5-1 inch). Rain had been expected, but the totals seemed to catch people off guard.
•The Chinese government reported this week that consumer prices rose by just 1.8% in July, which is down from 2.2% in June, and 3.3% in May. This is adding to speculation that China will need to act to spur extra growth. (also, the Chinese report said that the slow down in price growth was lead by food prices…?)
•Soybean meal export sales last week for the 2012/13 marketing year were 77.5 k mt, down from 106.5k mt last week and the four week average of 105.5k mt. However, outstanding sales for 12/13 are now 1.112 million metric tonnes, compared to just 518k mt at this point last year.
•The Malaysian Palm oil Board reported Malaysian palm oil production for in July was 1.692 million metric tonnes, up from 1.471 MMT in June. July ending stocks were reported at just under 2 MMT compared to about 1.7 MMT at the end of June.
IGC, or the International Grains Council, further substantiated what
everyone knows and reduced the 2012/2013 world corn production
forecast by 53 million tonnes to 864 million tonnes (11.81 billion
bushels) , primarily due to production losses in the U.S., while
soybeans were reduced by 8.3 million tonnes to 79 million tonnes (2.9
• Global corn ending stocks are expected to decline to the lowest level
in 6 years.
• Crop conditions on both corn and beans continued to drop this week.
Corn dropped 5 % from 31 to 26% in the good to excellent category
and beans dropped 3% from 34 to 31%.
• Informa came out this week and confirmed what everyone already
knew. The corn crop is bad and becoming terrible, and the soy crop is
bad but still better than corn. Informa lowered their corn yield estimate
to 134.5 bpa (USDA @ 146) and their soy yield to 38.5 bpa (USDA @
• Brent crude oil rose to around $106 per barrel on Friday, buoyed by a
European Central Bank pledge to protect the euro zone and hopes for
a fresh economic stimulus in the United States.
• Even if rain comes the next two weeks it is unlikely the yields will
improve much above the 38-39 bushel an acre so prices must rise to
• The most severed drought in five decades intensified this week
throughout the Midwest and the heat is expected to get worse in the
South which is still recovering from last years drought.
• The 6-10 day forecasts is calling for above normal temperatures
across the WCB.
The USDA reported weekly export sales at 193,200 for
2011/12 and 517,300 tonnes for 2012/13 versus trade ideas
of 300,000 to 600,000.
• Feed use is expected to decline, as is industrial use, led by
fewer livestock numbers and lower ethanol margins.
• Although later and not as widespread as needed, much
needed rains in the eastern corn belt pressured the grain
complex for much of the week. This is probably too little, too
late for corn, but could allow the bean crop to at least
stabilize and prevent further deterioration.
• The HPC 5-day forecast precipitation monitor is calling for
0.5-1.2’ of rain across the Corn Belt with 2” from OH to PA.
• Futures International reported that palm oil is lower after
reports showed a 16% month on month drop in exports.
• The world economy continues to struggle which could be
beneficial to the market since demand needs to be cut.
• An increase in Canola production could lower canola basis
levels and could possibly be competitive with soy basis
levels in Q2-Q3 of next year.
• Increased chances of rain over the next 10-15 days have
been reported which would help beans tremendously.
• The US economy grew at a rate of 1.5% during the second
quarter which is down from Q1 at 2.0%. The retail and
housing markets continue to get worse.
• The 6-10 day forecast is predicting above-normal
precipitation in the ECB.
Informa came out this week and confirmed what everyone already knew. The corn crop is bad and becoming terrible, and the soy crop is bad but still better than corn. Informa lowered their corn yield estimate to 142.5 bpa (USDA @ 166) and their soy yield to 40.0 bpa (USDA @ 40.5).
•Crop conditions on Monday showed corn fell 9% in the good and excellent categories, and beans dropped 6%. Both drops were above market estimates of 5% declines for both crops.
•Open interest in the $19 soybean call option (10/26 expiry) has grown by about 8,000 contracts in July to 12,086. Right now it would you cost you about 32 cents to buy $19 soybean protection (37% implied volatility vs. about 25% historical vol).
•Open interest in the $9 December corn call (11/23 expiry) has grown by about 25,000 contracts since the start of July. Right now it would cost you about 26 cents to buy $9 corn protection (37% implied vol vs historical of 45%).
•Open interest in the 60 cent December soybean oil call (11/23 expiry) has grown by 4,500 contracts to just over 13,000 since the start of July. It will cost you about 130 points to buy 60 cent bean oil protection (25% implied vol vs 24% historical).
• A Reuters poll this week of 13 analysts pegged the US corn yield at 137.2 bpa which is down significantly from the USDA. The low estimate was 128 given by Farm Futures, and the high estimate was 143.5 given by Goldman Sachs.
•The same Reuters poll mentioned above pegged the bean yield at 39.06 (USDA @ 40.5), with a low guess of 35.6 given by Agrivisor, and a high of 41.9 given by Allendale.
AgRural forecasted Brazilian soybean plantings for next year at 27.5-28.0 million hectares, up from just 25.0 million in 2011.
•AgConsult estimated Brazilian plantings at 27.9 million hectares, and forecasted production at 83.1 million metric tonnes, which is well above the current USDA estimate of just 78.0 million metric tonnes.
•According to Celeres, farmers have already sold about 37% of next year’s soybean crop, which is yet to be planted. This reflects farmer’s thoughts on high soybean prices, as well as opportunist selling as farmers take advantage of the weak Brazilian Real, since world soybeans are priced in US Dollars.
•Friday Canola Insight reported that canola crop conditions in Saskatchewan, the largest canola producer, improved by almost 17% in the last 2 weeks. Currently 75% of the Saskatchewan crop is rated as good to excellent versus 68% for same time last year. 92% of the province is rated as adequate to surplus moisture.
•Markets are tremendously overbought from a technical standpoint and there is potential to see a correction in terms of profit taking across commodities.
•Thursday provided some strong showers in the ECB giving beans some much needed relief.
China’s National Grains and Oil Information Center said this week that soybean imports in June were 5.62 million metric tonnes, bringing the Oct-June total to 43.977 mmt, which is up nearly 15% from the same period last year. The CNGOIC is forecasting July soybean imports at 5.5 mmt ,compared to 5.355 in July 2011.
•Oil World raised some flags this week after they said that the current heatwave hitting the US, coupled with a poor crop in South America, could mean that global supplies of beans, meal, and oil will be insufficient to cover demand in coming months. They warn that deteriorating prospects for the US corn crops means that DDGS production could slow substantially, there by increasing demand for soybean meal at the same time world demand for meal is large.
•The USDA shocked almost everyone on Wednesday as they dropped their 2012/13 corn yield estimate to 146 bpa from 166 bpa previously. This was below even the lowest market estimate of 147.1 bpa. Even when the USDA incorporated the higher planted acres estimate of 96.4 million, and lowered exports by 300 million bushels, the effect of the lower yield dropped the 12/13 corn carry out to 1.183 billion bushels, compared to their June estimate of 1.881 billion.
•The USDA also turned heads on its soybean yield, dropping it to 40.5 bushels per acre, down from 43.9 bpa in their June estimate, also lower than the lowest trade estimate of just 41.3 bpa. The WASDE report also showed its lowest soybean ending stocks ever at 130 million bushels for 12/13. Many believe this is the lowest stocks the USDA will be willing to show.
•This week Godlman Sachs increased its six and twelve month guidance for corn prices to $6.90/bushel from $6.30 previously as they lowered their yield estimate. They also raised their soybean forecast to $16.25 from $15.50 previously.
Soybean oil export sales for this crop year were up noticeably from last week and from the four week average. This could reflect increased oil availability in the US that is being pushed out of the country rather than consumed domestically.
•Palm oil’s discount to soybean oil (on a global basis) continues to grow. Now at around US$230/metric tonne under soybean oil, palm oil should start to buy demand away from soybean oil. Palm’s discount to soybean oil has grown substantially from US$65/metric tonne under soy back in May due to the run up in CBOT prices.
•The US Dollar continues to rally, and is now up nearly 7% against a basket of major currencies since the beginning of May. A strong US$ means two things for us. First, it could mean that fears about the health of the global economy are mounting. Second, a high US Dollar hurts the export competitiveness of US goods, which hurts demand.
•China’s GDP growth fell to its lowest level in three years during the last quarter, with annualized growth falling to 7.6%. This was below analysts expectations of 7.7%, and below last year at 8.1%. Now with six consecutive quarters of slowing growth in China, many are starting to worry how strong their economy really is, and therefore how healthy the world economy is.
•Soybeans have more time than corn does when it comes to weather. While no rain in the next week or so could spell catastrophe for the corn crop, soybeans can hang on at least through the first part of August without having extreme losses.
Fear about declining crop conditions is really taking hold in the market. On Monday, corn was locked limit up from July „12 to July „13 as traders anticipated a conditions drop in the “good-to-excellent” categories of two points to 61%. When the report did come out, it showed conditions dropped 7 points , much more than expected, and the worst rating for this time of year since 1992.
•For soybeans, the USDA showed that crops rated in the good & excellent categories fell to 53% last week, a drop of 3% week on week. 53% good & excellent is the worst rating for this time of the year for soybeans since 1988.
•Talk is growing of poor yields as a result of the dry weather, and many are prefacing their comments by saying that whatever the USDA acreage says, it will likely be high due to the early nature of their survey (ended on June 1). Some people are now throwing around corn yields in the low 150s.
•Ramadan, which starts July 20th, will likely underpin palm oil demand despite strong production in June. Production is expected to be up around 8% in June, and exports up around 5% as people build stocks ahead of the holiday. Also, palm‟s growing discount to soybean oil, now around $208/tonne (up from just $65/tonne at the start of May), is starting to unlock unconventional demand for palm.
•It was reported this week that Cropcast reduced its corn yield estimate to 155.2 bpa from 158.6 bpa previously. For soybeans they lowered their yield estimate to 41.6 bpa to 42.4 bpa previously. Cropcast cautioned that if weather remains constant, the corn yield could fall below 150.
•Oil World increased their estimate for China‟s soybean imports this crop year by 1 million metric tonnes to 57.9 mmt, and increase of 5.6 mmt year on year.
While the crop condition ratings for soybeans are very poor, the situation is not quite as bad as it is for corn which is later in its development stages. Most people think that in general soybeans are still in too early of development stages for the hot and dry weather to have a large impact of yields like they do for corn.
•New crop soybean sales in Brazil worked higher to 31% of expected production, according to Celeres, who says they have no applicable data for comparison due to the early nature of new crop sales in Brazil this year. Increased farmer selling tells us that Brazilian farmers believe current prices are high enough that they should lock in a profit. However, a lot of their actions are driven by the weak Brazilian Real, which is near its weakest point vs. the US$ in the last three years (Brazilian farmers do this because world soybeans are sold in US funds, so they can buy more Reals with their sales revenue).
•There is a version of weather modeling (I cant remember if it‟s the European or the American) that has consistently been showing wetter patterns across the Midwest for the 6-15 day period. Most meteorologists have written this off as a poor model anomaly, but if its true it could get rain to much need bean acres in time to offset severe damage.
•Friday‟s USDA report showed that June 1st soybean stocks were over 667 million bushels, a good deal above market expectations of 635 million.
•The USDA report also showed the bean acres increase to 76.08 million, up from the USDA‟s last estimate of just 73.9 million acres.
Managed fund positions went longer in all legs of the soybean complex last week. Funds increased their long positions in beans and meal, and decreased their short in oil. This was the first increase in all three legs since the end of April.
•Oil World cut its forecast for Aug. 31st soybean stocks in the US to around 154 million bushels, down from their previous estimate of 169 million back in May. Oil World cites strong export and crush demand to drive the stock decline.
•June 1 soybean stocks in South America fell to 72.36 million tonnes from 96.09 million tonnes on June 1st last year, Oil World estimates. Increased Chinese consumption was the largest factor in the stock decline.
•Australia’s Bureau of Meteorology said this week that its climate models continue to indicate a return of El Nino this year.
•The market will watch for the weekly crop progress report on Monday. Analyst suspect the soybean crop rated in good or excellent condition to drop 1%-3%, this could potentially build more weather premium into prices.
•Farmers who have planned to double crop after their wheat harvest are going to face a difficult time with such dry conditions. The bean supply could become even tighter with the poor South American harvest and the problems the U.S. currently faces.
•According to agriculture.com, “ A survey released Monday shows that 76% of farmers say that their crop needs considerable rain and, even if they do get it, they “may not get to full yield potential.”
•The USDA has reported weekly net sales of 258,700 metric tons of U.S. soymeal for the 11/12 year, up significantly from the previous week and from the prior 4-week average. Net sales of 20,400 metric tons of U.S. soy oil were up noticeably from the previous week and 94% from the prior 4-week average.
China’s consumer price inflation increased 3% in May. While this was the lowest level since mid-2010, Chinese officials took the opportunity to remind markets that they will act to suppress farm product prices if inflation increases too rapidly.
•High futures prices and weak currencies in South America are encouraging farmers to increase soybean acres this year relative to other grains. Oil World estimated this week that Argentine farmers will plant 19.60 million hectares this year, up from 18.53 million in 2011. They estimate Brazilian farmers will plant 26.4 million hectares this year, up from just over 25 million last year.
•The Federal Reserve announced this week their intention to continue with “Operation Twist” which is their effort to sell short-dated treasuries and buy long-dated treasuries to try and force long term loan rates like mortgages down, thereby spurring investment. While it should be supportive to the economy, many were hoping the Fed would announce a third round of Quantitative Easing, which would be an immediate injection of liquidity into the economy.
•The soybean market is overbought which could create a spark in short-term noncommercial selling.
•To meet the USDA’s projection for export shipments, the US needs to average 14.8 million bushels a week. Last weeks exports were reported at 13.8 million bushels.
•For the month of May, Chinese veg oil imports were down 13% at 528 TMT. On the upside, Oct-May Chinese imports are running 9% higher compared to last year.
•There has been a strong fear in economic growth across the world with major concerns that demand will continue to hinder.
•Economic concerns and doubt continues to grow in Italy as their confidence levels dropped to an all-time low at a 85.3 rating.
Oil World estimated this week that soybean exports out of the United States will increase by 40% year on year between September 2012 and February 2013. They cite the smaller than expected South American crop causing excessive tightness in the world bean market before the South American harvest in March. So far it looks like the US will have a decent soybean crop, so the world will come to us for supply. This should support soybean prices as crushers try and protect their supply to meet increasing meal demand.
•In the same report mentioned on the “bears” side, the same Ag Attache warned that 24 months of continuous palm production growth in Malaysia is causing stress on the trees raising the potential for lower yields going forward.
•Sinograin estimated this week that China will import 57.5 million tonnes of soybeans in 2012/13, up from 55 million in 2011/12. Sinograin cites a smaller domestic crop as one reason for the increase.
•The Malaysian Palm Oil Council said this week that stocks of palm oil in Malaysia could fall in coming months due to increased demand from Ramadan, which starts in the third week of July.
•A Reuters poll of five plantation houses showed that palm oil stocks in Malaysia likely fell to a 13 month low in May, falling 2.9% to 1.79 million tonnes.
•On Thursday, China’s central bank cut benchmark interest rates by 25 basis points in a move few analysts expected. At the same time they cut deposit rates by 25 basis points. Both moves are an effort to increase economic growth.
•The USDA announced the sale of 410,000 tonnes of soybeans to China on Friday, 60,000 tonnes for 2011/12, and 350,000 tonnes for 2012/13.
Macroeconomic worries continue to weigh on all markets. Crude oil threatened to break below $80 before bouncing back, but another move lower could shock the market into another round of scared selling.
•The US Agriculture Attache in Malaysia reported this week that in April, Malaysia’s crude palm oil production rose 5% to 1.3 million tonnes.
•Informa estimated that next year’s soy crop in Brazil would be 80.5 million tonnes, which would be a record high. Informa also estimated Argentina will produce 60 million tonnes next year, also a record high.
•The United Nations’ Food and Agriculture Organization said this week that global food prices fell in May for the second straight month and are likely to fall again in June. They estimated world grain stocks at the end of 2012/13 will likely be 548 million tonnes, up from their previous forecast of 524 million.
•A closely watched palm oil analyst, Dorab Mistry, said this week that he believed palm oil could fall another 200-300 ringgits (about 10% from current levels) if world financial authorities fail to bolster the world economy.
•Export sales across the soy complex disappointed this week. Soybean export sales were 495,000 mt (220 oc, 275 nc) vs expectations of 600,000-850,000 mt. Soy meal net sales were 80,200 mt (75 oc, 5.2 nc) vs. expectations of 50,000-150,000 mt. Soy oil net sales were 8,100 mt (13.1 oc, -5 nc) vs expectations of 5,000-15,000 mt.
•The USDA’s chief economist said this week that corn prices could fall significantly this year as corn stocks build and ethanol demand flattens out.
Brazilian soy farmers have started selling next years crop at the fastest pace on record. Sales for next year are now around 27% of expected production, and given the early nature of these sales there is no applicable data from previous years to compare this to. What this is saying to the market is that farmers in Brazil believe market prices now are attractive enough to release supplies. However, one thing to note here is that the Brazilian Real is still near a three year low versus the US$ (meaning 1 USD can buy more BRL), so farmers could be taking advantage of the weak currency now in anticipation of it strengthening.
•Palm oil exports from Malaysia were reported as down 0.2% in May compared to April by SGS, and up 2.4% by ITS, both cargo surveyors. Either way, exports were still disappointing given the recent price decline of around 200 USD/MT over the last two months.
•The US Unemployment rate for May rose to 8.2% from 8.1% in April. The report came in at the scary end of expectations. Non-farm payrolls increased by 69,000, while the consensus guess was for an addition of 150,000, and many thought the “freak-out” threshold was sub-100,000. Oh, and the April non-farm payroll increase of 115,000 turned out to be a little too high, the BLS revised that down to just 77,000. The Dow fell an additional 100 points on the news.
•The US Dollar Index has rallied about 6.3% since May 1st, which hurts the export competiveness for agriculture products out of the US.
•Soybean and soybean meal export sales for the week ended 5/24 disappointed. Bean sales of 240,700 mt were down 70% from the previous week, and down 61% from the four week average. Meal sales of 33,200 were a marketing year low, and down 71% from the four week average.
Oil World warned again this week that that the Argentine soybean crop could fall as low as 39 million tonnes as a mix of droughts in some areas, and floods in others, have caused farmers to abandon their crops. Oil World’s current estimate is for a crop of 40.5 million tonnes.
•Oil World is estimating that global consumption of soybean oil is likely to exceed production this year by 500-600k tonnes, which will result in a drop of world stocks to 3.8 million tonnes.
•Despite resent cancellations, Oil World estimates that China will increase their soybean imports this year to 56.8 million tonnes, up from 52.3 million last year.
•There has been a lot of talk about poor soil moisture across Indiana, Iowa, Illinois, Kansas and Oklahoma effecting bean acres. For now, a lot of the focus is centered on non-traditional soybean planting states . Many of these states were expected to plant “double crop” beans this year, meaning they would play beans after their wheat crop that is being harvested early. However, poor soil moisture will likely limit the amount of double crop beans, as well as their yields, which will make the soybean carryout even tighter for next year.
•Poor soil moisture has also lead to many reports of “rootless corn syndrome” across parts of Iowa, Illinois, Indiana and Ohio. Thought to be caused by excessive dryness, rootless corn syndrome is highlighting the need for a lot of rain across parts of the Midwest.
•In the last week, WTI Crude Oil has lost 9.59%, but soybean oil has lost just 3.7% in the same time. This could be evidence that soybean oil is finding support under 5000 despite increasing crude oil weakness.
As is covered in the following slides, soybean oil’s fate has been tied closely to that of crude oil over the last month. And with elections in Greece and France dampening optimism in Europe, as well as the threat of war with Iran diminishing, crude oil has fallen from around $105/barrel in April, to $96 on Wednesday. Forecasts vary for the price of crude oil in the short term, really depending on your macroeconomic view. Better macro indicators should favor crude demand, which could lift soy oil prices with it.
•The ratio of non-commercial fund’s net meal position to their net oil position is now at 7.36, which is the highest it has been since March 13th. This is most evident in oil share falling substantially in the last month. If traders look to take profits from this trade (since it has done quite well) there could be short term support for soy oil.
•The Rosario Grain Exchange lowered their Argentine soybean estimate to 40.9 million tonnes from 43.1 million last month.
•The USDA estimated 2012/13 soybean oil carry out will be 2.225 billion lbs, which would be a disappearance of 340 million lbs from September 2012 to September 2013. The loss is attributed to a lower oil yield in 2012/13, slightly lower crush, and a higher domestic consumption.
•The USDA is no longer breaking out US soybean oil usage in biodiesel production due to unreliable numbers. Even though their numbers were unreliable, the loos of them still adds one more layer of murkiness to an already unclear market. If nothing else, this could cause volatility in soybean oil purchases by biodiesel producers.
Non-commercial funds decreased their long position in the soybean complex (net position in beans, meal, and oil) last week for the first time since January 31st. This could signal a shift in investor sentiment away from risk. So far the move has actually been concentrated in product positions, as bean length actually increased but oil and meal length decreased by larger magnitudes.
•Non-commercial funds have now decreased their total open interest in soybean oil futures and options for three straight weeks. Total open interest is now at its lowest point since mid-March, indicating there might be better returns else where.
•The Brazilian Real has weakened considerably in the last 10 weeks, falling to 1.971 USD on May 9th, from 1.686 USD on Feb 29th, a staggering 17% decline. This is significant because world soybeans are traded in US Dollars, so if a Brazilian farmer can sell his product in US$ then buy more Reals, he will be a happy seller. So increased farmer selling in Brazil has been one of the main drivers pushing soybean prices lower in the last month or so.
•In a sea of decreases, Conab, Brazil’s agriculture ministry, raised their estimate for the soy crop to 66.7 million tonnes, up from their April estimate of 65.6 million.
•The USDA increased 2011/12 soybean oil carry out by 275 million lbs from the last report. 11/12 carry out is now 2.565 billion lbs compared to a carry out of 2.363 bln lbs in 2010/11, and 3.046 bln lbs in 2009/10.
There is thought that Argentina’s nationalization of YPF, Respol’s (now former) subsidiary in Argentina, will cause Spain to look elsewhere for both Methyl Ester and feedstock. One place they are thought to be looking is the US for soybean oil, which would be an unusual flow for the US. Spain imported about 886,000 tonnes of soy methyl ester from Argentina last year, all of which will now halt in response to Argentina’s nationalization.
•Oil World cut their Argentine soybean production estimate by 1.5 million tonnes, now at 42.5 million. Oil World cited further drought impacts as the reason for yet another cut. Furthermore, Oil World warned that soybean crop estimates in South America have not yet stabilized, leaving the door open for further cuts.
•Soybean export sales were 962,200 metric tonnes last week, up from the prior week and the four week average. High soybean exports will force up the price of soybeans in the US as crushers compete to buy the beans before the leave the country. So even if there is higher crush, soybean oil prices could be pushed higher due to bean exports.
•The Buenos Aires Grain Exchange cut their soybean production forecast for Argentina yet again. The new cut was 1 million tonnes, putting total production at 43 million.
•It was announced on Friday that exporters sold 110k tonnes of soybeans, and 120k tonnes of corn were sold to china (beans 12/13, corn 11/12). In addition, 116k tonnes of beans and 1.44 million tonnes of corn were sold to unknown destinations, both for the 12/13 crop year. At 1.56 million tonnes, yesterday marked the fourth largest single day corn sale.
The EPA reported that over 107 million gallons of biodiesel were made in the month of March, up significantly from the 77.7 million made in February. If we take the three month average rate and extrapolate it out for the rest of the year, the biodiesel industry should be on pace to hit the billion gallon mandate. This means there should be fewer large spikes in biodiesel production this that would send soybean oil prices into a frenzy.
•Meal exports at 221,100 mt were down last week from the previous week, but still up 38% from the four week average. Strong meal exports will incentivize US crush, and thereby increase oil supply.
•Q1 US GPD at 2.2% came in below expectations of 2.5%, and below previous growth of 3%. This is a troubling sign for some that the economy is entering another spring slowdown which would hurt overall US demand.
•Argentine soybean crush is reportedly down 11.5% from a year earlier in March at 2.437 million metric tonnes. Lower South American crush could send product demand to the US.
•The Spanish Government has signaled their intentions to produce all of their domestic biodiesel needs from locally produced methyl ester with locally produced vegetable oils and fats. While some analysts like oil world doubt this is possible, initially it could cap demand for veg oils from outside the EU into Spain.
Barclays reported this week that investment flows in the first quarter of 2012 were $6.9 billion into commodity funds, which put total assets under management at $435 billion, an all time high. This could signal increasing investor risk appetite, and since some “unseasoned” investors view past performance as a future predictor, this could be a case of follow the leader which sends prices soaring.
•Oil World cut their Argentine soybean estimate by another million metric tonnes this week, now at 44 million. They also reduced their Brazil estimate by 0.5 million metric tonnes down to 65.0.
•The USDA estimated that Brazil and Argentina produced 124.5 million metric tonnes of soybeans last year. Based on Oil World’s projections, the world will face a deficit of 15.5 million tonnes from those two countries alone. Oil World estimates global soybean production will be down 26.6 million tonnes this year. From Oil World: "This is going to reduce world soybean stocks more sharply than expected by end-August 2012. The tightness is going to spill over to at least the first of the world crop season 2012/13, when a sharp decline in South American exports will raise the dependence on U.S. supplies. World Apr./Sept. 2012 soybean crushings are likely to be smaller than anticipated which will keep prices of soymeal and soyoil well supported.”
•Soybean oil export sales last week were much higher than expected at just under 24,000 tonnes. Expectations were for about 10,000 tonnes. The argument could be made that the these additional oil exports were a result of the additional meal sales, meaning the higher crush that will be needed to sell the meal will not actually result in any more oil available to the domestic US market, since it has already been committed to export.
•The Argentine government lowered their forecast for this year’s soybean harvest to 42.9 million tonnes, down from their previous forecast of 44.0 million.
The USDA reported much larger than expected old crop meal sales this week of 300,700 metric tonnes. Trade estimates were for between 75,000-150,000 tonnes. Large increases were seen for the Philippines, unknown destinations, and Japan. Larger than expected old crop meal demand could help crush rates in the usually weak summer months, thereby increasing oil supply.
•Corn crop planting progress didn’t increase by as much as expected last week at only 17% planted. Some people had been forecasting a planted percentage in mid to upper 20s. This could be just a result of insurance planting dates and rains late in the week in Iowa, or it could be indicative of some farmers switching acres back to soybeans in the face of the large price move in March relative to corn.
•With the prospect of early planting a large likelihood across much of the country there is talk that if all goes well early harvest could help easy supply concerns in the last part of summer. With more bushels coming in early (and maybe even at better yields) the market could be saved from the brutal old crop/new crop transition we saw last year.
•NOPA reported this week that total oil stocks grew by 120.9 million lbs in the month of March. This was slightly smaller than the February build of 144 million lbs (especially since Feb has 2 less days), but in the end it still means more oil.
•NOPA also reported that the average NOPA oil yield increased by .04 lbs per bushel to 11.55 lbs/bsl. This is above the current USDA estimate of 11.45 lbs/bsl.
•The huge non-commercial fund length in the soy complex has lead some to wonder who is the next buyer in the market? With soybean prices near four year highs, demand destruction is obviously on many people’s minds (which it has to be since global balance sheets say something has to give…).
Oil World has once again cut its forecast for Brazil’s soybean crop, and is now at 66.5 million tonnes, a drop of 1.5 million from its previous forecast. They also cut their Argentine estimate by 0.5 million tonnes to 46.5 million. Oh, and don’t forget about Paraguay. Oil World also decreased their production by 0.6 million tonnes, now at 4.0 Mnt.
•Last year, Brazil, Paraguay, and Argentina produced 132.9 million metric tonnes of soybeans. Based on Oil World’s forecast, these three countries will now likely produce only 117.0 million tonnes, a decrease of just under 16 million tonnes. 16 million tonnes is about 590 million bushels, and assuming they will all get crushed at some point, somewhere in the world, it will result In about 6.7 billion lbs of lost soybean oil supply worldwide.
•The EPA reported this week that US biodiesel producers made 141 million gallons of biodiesel in January and February, above most trade estimates.
•Just as Argentina gets into the thick of their soy harvest, Argentine grain truckers have called a strike aimed at disrupting the flow of beans and corn to the ports. Most of Argentina’s grains are transported to the ports by truck, so a cap on supply could hurt crush and exports.
•Net export sales of 38,100 metric tonnes of soybean oil last week were a marketing year high, and up significantly from the week prior and the four week average. Last week’s number was only 5,000 tonnes.
•Chinese officials said they expect to import 5.1 million tonnes of soybeans in March, an increase of 33% over February. The same officials said that China’s soy imports in the first six months of 2012 could be up over 25% compared to a year earlier, led by stronger demand from domestic feed producers.
AgRural estimated this week that 55% of Brazil’s soybean crop has been harvested, up significantly from last year’s 46% harvested at this time. AgRural’s current production forecast is 68 million tonnes.
•Another consultancy estimated that Brazil’s harvest was 58% complete compared to 49% last week and only 41% last year.
•Crop analyst Michael Cordonnier is forecasting US Soybean acres this year at 75.5 million, well above the USDA estimate of 74 million. He is also forecasting corn acres of 95.5 million compared to the USDA’s estimate of 94 million.
•The Linn Group estimated this week that US farmers will plant 76.7 million acres of soybeans this year, up significantly from the USDA Outlook Forum estimate of just 74 million acres.
•Net soybean export sales were 356,700 metric tonnes last week, down 42% from the previous week, and down 56% from the four week average.
•Net export sales of soybean meal were 87,400 metric tonnes last week, down 44% from the week prior and down 35% from the four week average.
•Net soybean sales were the lowest in 7 weeks and saw the smallest purchase by China in 5 weeks, which could mean that demand is flowing back to South America.
•Cargo surveyor SGS reported this week that exports of Malaysian palm were 886,706 tonnes in the first 20 days of March, a 14% increase compared to the first 20 days of Feb.
•China is starting to worry traders world wide as the latest measure of factory activity in the country fell from the previous month. The thought is the European recession is hitting China hard, which could lessen demand for a wide range of commodities.
•The Argentine gov’t increased their soy crop estimate by 0.5 million tonnes to 44.0 million tonnes.
Oil World lowered their Brazilian soybean forecast yet again to 68 million tonnes, now down 7 million from a record 75 million tonnes of production last year.
•Oil World is forecasting that imports of biodiesel by the European Union will likely increase again this year as high prices of vegetable oil following poor 2011 rapeseed crops are raising production costs. Biodiesel plant closings in the EU could cause global methyl ester prices to rise, incentivizing producers in the US to run harder to export supplies to Europe.
•Exports of soybeans are likely to grow in the second half of this crop year, according to Oil World, as South American bean crops continue to shrink. Oil World also expects China’s bean imports to grow, meaning they will have to rely more heavily on the US to supply them. Stronger than normal US soybean exports would compete directly with US soybean crush plants trying to buy beans, thereby reducing crush margins, or slowing crush plants altogether, ie limiting the supply of soybean oil.
•Crop scout Michael Cordonnier lowered his estimate for Brazilian soybean production to 67 million tonnes from 68 million previously. He also left his Argentina estimate unchanged at 47 million tonnes.
•Dow Jones reported this week that Argentina sold about 4.5 million tonnes of soybeans to China for April-June shipment.
•NOPA oil stocks came in about 42 million lbs higher than expected, but crush came in higher than expected as well. We think the higher crush means that stocks should have grown by more than what NOPA showed, meaning oil demand must have been higher than anticipated in February. The biggest question is whether that demand was on the food or biodiesel side?
•Agroconsult lowered their Brazilian soybean crop estimate to 67.1 million tonnes, down from their previous estimate of 69.9 million.
Officials with the United Nations food agency said this week that improved grain supplies should help to put pressure on food prices this year, with averages for 2012 falling below 2011. They also forecasted less volatility in prices this year compared to last year.
•Celeres reported this week that farmers have sold about 59% of this years soybean crop, up from 57% last week. They estimate harvest reached 49% this week compared to 38% in the week prior. States with the largest harvest increase were Mato Grosso and Parana, both up 14% week on week.
•Extremely warm weather across the US is increasing the likelihood of an early planting for both soybeans and corn, which would mean an earlier harvest and help smooth the tight stock position in September and October. Record high temps for March have fallen on at least three days this week, and Minneapolis hit 74 degrees on Wednesday, which is the earliest 70 degree day in the Twin Cities since records began in the early 1800s.
•NOPA reported that February crush was 136.35 million bushels, which was on the high side of market estimates. This level of crush meant that daily crush and capacity utilization was the highest we have seen so far this crop year.
•On the back of the higher crush figure, oil stocks increased by 144 million lbs, also on the high end of estimates. NOPA also increased their oil yield to 11.51 pounds per bushel, which is well above the USDA estimate of 11.45 lbs/bushel.
•The US Senate voted down two amendments this week that included provisions to reinstate the $1/gallon blenders credit for biodiesel.
Safras, a Brazilian agriculture consultancy, reduced its soybean crop estimate for the country to 68.228 million tonnes, down from its February 27th forecast of 70.273 million tonnes.
•Informa also reduced its Brazilian soybean crop estimate to 68 million tonnes, down from 70.0 million in its previous estimate.
•Celeres, another grain analysis group, cut their Brazilian soybean production estimate by 2.2 million tonnes to 69.8 million compared to their estimate in early February.
•Abiove decreased their Brazilian soy crop estimate to 69.5 million tonnes, down 2.4 million tonnes from their February estimate.
•An Indian vegetable oil industry official said this week that they expect India’s palm oil imports will rise 8% this year, mostly due to poor domestic crops this year. India is the world’s top palm oil buyer.
•A poll of five Chinese and Sinaporean trading houses ahead of the Bursa Malaysia Palm Oil Conference showed that stocks of palm oil in China grew to nearly 1 million tonnes over the last 8 months, which is more than double the usual stock level of just 400k tonnes. Some think stocks could rise as high as 1.5 million tonnes as China seeks to subsidize domestic prices through high stocks.
•Oil World cut their 2012 Brazilian soybean crop estimate by 1.5 million tonnes to 68 million. Their December forecast was 72.8 million tonnes.
•Oil World thinks that expanding biodiesel production in Argentina, coupled with a shrinking crop, will caue world vegetable oil prices to rise this year. The estimate FOB Argentina prices for crude soybean oil could rise above 57 cents/lb.
•The USDA lowered world soybean ending stocks by 3 million tonnes, and world production by 6.4 million tonnes for the 2011/12 crop year.
Chinese Premiere Wen Jiabo announced this week that the government was lowering their economic growth target to 7.5% from the 8.0% growth target that has been in place since 2005.
•Safras e Mercados estimates that the Brazilian soybean crop was 33% harvested as of March 2nd, compared to just 24% harvested in the previous week, 22% last year, and the five year average of 21%.
•The Food and Agricultural Policy Research Institue (FAPRI), a University of Missouri think tank, estimated on Monday that the US will produce 13.916 billion bushels of corn this year, and 3.243 billion bushels of soybeans. This compares to USDA production estimates of just 13.501 billion bushels for corn, and 3.056 billion bushels for soybeans.
•FAPRI estimated that 2012/13 soybean ending stocks would be 301 million bushels, compared to the USDA’s estimate of 275 million, and 215 million for 2011/12. They also estimated corn ending stocks at 1.346 billion bushels compared to the USDA estimate of 801 million.
•Soybean oil exports last week were just 2,000 tonnes, down from 3,000 in the week prior.
•Soybean meal exports last wee were 137,000 tonnes, also down from last week’s exports of 158,000 tonnes.
•The NOAA’s Climate Prediction Center said this week that La Nina conditions were expected to transition to ENSO neutral conditions by the end of April.
•The USDA raised their estimate for 2011/12 soybean oil ending stocks by 100 million lbs in Friday’s report after the lowered domestic US food consumption by the same amount.
•Informa released their latest US acreage estimates on Friday, and they increased their soy estimate by 560,00 acres to 75.128 million. They also raised their corn acres to 95.513 million, up from 94.748 million previously
Agriculture consultancy group Agrural said on Monday that their new estimate for 2011/12 soybean production in Brazil is 68 million tonnes, down significantly from the 70.2 million tonnes it forecasted in January.
Another consultancy group, Agroconsult reduced their Brazilian soybean production estimate by 1.1 million tonnes to 69.9 million, compared to its forecast earlier this month.
Commodity funds have been off to a good start so far in 2012, which could attract more fund money following the flight from commodities last year. So far, the 18-commodity Thomson Reuters Jefferies CRB index is up 6.7% in 2012.
US Soybean futures hit a five month high on Friday following recent actions from China, who booked their second largest purchase ever from the US last week. Markets are expecting China to keep coming back to the US this year as dryness in South America has shrunken the crop.
China’s National Grain and Oils Information Center said that soybean crush margins have improved recently, and domestic product output has increased in kind. Stocks of soybeans in China have fallen to 5.7 million tonnes, according to the NGOIC, compared to 6.2 million a year earlier. This is increasing speculation that China will need to come to the market for more beans soon, competing with crush in the US.
The USDA attache in Brazil forecasted this year’s soybean crop would be 70 million tonnes, well below the 75.3 million produced last year. He also forecasted that exports out of brazil would fall by almost a million tonnes.
On Wednesday the USDA reported the sale of 285,000 tonnes of soybeans to China, 175,00 old crop.
Net soybean meal exprot sales were only 40,000 tonnes last week, a marketing year low, and down 70% from the four week average. This does not bode well for US crush.
Malaysian palm oil export surveyor ITS reported this week that total exports for Feb 1-25th were over 992,000 metric tonnes, an increase of over 1% compared to the same period in January. Cargo surveyor SGS reported exports were nearly 900,000 tonnes, up about 4.5% over the same period in January.
Barclays reported this week that investment flows into commodities slid by 78% in 2011 to $15 billion, including net withdrawals of $7.7 billion. Withdrawals came as the CRB commodities index posted a net loss of 8.2% for 2011, compared to a 17% gain for treasury bonds.
Consultancy group Celeres estimated this week that soybean harvest in Brazil was 29% completed as of February 24th, compared to just 19% completed at the same time last year. They are also estimating that farmers had sold 55% of their crop, compared to 54% last year.
The USDA attache in Brazil reported that Brazil’s soybean crush will likely fall by 0.6 million tonnes this year, which could mean more product exports could flow from the US (admittedly, this is up in the air since Argentina is the main product exporter, both for oil and meal, and their crush capacity is strategically set up to export).
Net soybean oil export sales last week of 4,800 metric tonnes were down 81% from the previous week and 75% from the four week average. Actual exports of 3,100 tonnes were down 91% from the previous week and 80% from the four week average.
Net soybean sales were of 549,100 metric tonnes were down 53% from the previous week, and 8% from the four week average.
Informa actually raised their Argentine soybean crop estimate by 1 million tonnes this week to 48.5 MMT.