 According to University of Illinois agricultural economist
Darrel Good, large U.S. exports are expected this year even with
record-large production in South America. Good said that the
USDA's Foreign Agricultural Service estimated the size of the
2013 crop in South America (Brazil, Argentina, Paraguay,
Bolivia, and Uruguay) at 5.377 billion bushels and forecasts the
2014 crop at 5.766 billion bushels. The projected size of the
2014 crop is 1.515 billion bushels larger than the
drought-reduced crop of 2012.
"Compared to production this year, production in 2014 is
expected to be 220 million bushels larger in Brazil and 190
million bushels larger in Argentina," Good said. "Larger crop
expectations reflect increased acreage, particularly in Brazil,
and expectations of slightly higher yields, particularly in
Argentina. Production is expected to be down slightly in
Paraguay and Bolivia. The actual size of those crops will not be
known for several months, but current weather conditions are
generally favorable, and some anticipate that the Brazilian crop
in particular will be larger than the current forecast," he
said.
Good explained that the primary reason for the forecast of
large U.S. soybean exports in the face of record competition
from South American supplies is the strength of Chinese demand.
The USDA estimates show that China imported less than 1
billion bushels of soybeans from all origins as recently as the
2004-05 marketing year. Those estimates show larger imports each
year since then, reaching 2.2 billion bushels during the 2012-13
U.S. marketing year. Chinese imports during the current
marketing year are projected at 2.535 billion bushels. China
accounted for 63 percent of total world soybean imports during
both the 2011-12 and 2012-13 marketing years. That share is
projected at 66 percent for the current year. China imported 864
million bushels of U.S. soybeans during the 2011-12 marketing
year and 791 million bushels during the 2012-13 marketing year.
Exports to China accounted for 63 percent and 60 percent,
respectively, of total U.S. soybean exports in those two years.
"Large soybean imports by China have been the result of the
combination of declining production and increasing consumption,"
Good said. "Chinese production totaled an estimated 639 million
bushels in 2004 and only 448 million bushels in 2013. China
consumed an estimated 1.583 billion bushels of soybeans during
the 2004-05 marketing year, and consumption during the current
marketing year is forecast at 2.921 billion bushels. Chinese
consumption of soybean meal this year is forecast to be 126
percent larger than in 2004-05, while consumption of soybean oil
is expected to be 89 percent larger," he said.
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According to Good, sales of U.S. soybeans for export during the
2013-14 marketing year have been extremely large. As of Dec. 5, the
USDA reported sales for the year that began on Sept.1, 2013, at
1.421 billion bushels, with nearly half of that total already
shipped. Additional large sales under the daily reporting system
have been reported since Dec. 5 and will show up in subsequent
weekly summaries. Sales account for just over 96 percent of the
USDA's projection of exports for the year ending Aug. 31, 2014. In
the previous five years, total sales as of the first week of
December accounted for 53 to 83 percent of total exports for the
year. Sales to China as of Dec. 5 totaled 901 million bushels, or 63
percent of the total sales, with additional sales reported since
Dec. 5. Sales to "unknown" destinations, which may include some
sales to China, accounted for an additional 14 percent of the total
sales.
"With 38 weeks left in the 2013-14 marketing year, soybean export
sales are already near the total export projection for the year,"
Good said. "On the surface, it appears that either exports will
exceed the USDA projection or that prices will have to increase to
slow the pace of consumption. With year-ending stocks of U.S.
soybeans already forecast at a near-pipeline supply of 150 million
bushels, there is little room for exports to exceed the current
projection."
Good said that exports can be measurably larger only if the 2013
U.S. crop was larger than the current forecast (final estimate to be
released on Jan. 10, 2014) or the domestic crush is smaller than
forecast.
"A third alternative is that China will cancel some purchases of
U.S. soybeans if the South American crop turns out to be large and
prices are lower, and/or the current bird flu situation there
worsens and reduces the demand for soybean meal.
"Developments over the next few weeks will be critical for the
direction of old-crop soybean prices," Good said. "A combination of
export sales cancellations, a larger U.S. crop estimate or a larger
South American crop estimate would likely trigger a lower price
trend. Without such developments, current high prices would likely
persist a while longer in order to finish the rationing of old-crop
supplies. Protecting the downside price risk appears prudent," he
said.
[Text from file received from the
University of Illinois College of Agricultural, Consumer and
Environmental Sciences]
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