The recently released USDA’s World Agriculture Supply Demand Report (WASDE) draws its significance from the fact that its is the maiden report to project the likely balance sheets for the new crop year 2012/13. it is worth noting that global edible oil markets have seen supply constraints build post second half of the marketing year which has led the prices to flare up, especially the CME soy complex. Therefore, in the first place, new crop supply projections are relaxed on the expectation that US soybean yields could bounce back after witnessing a fall this year. Similarly, SA soy crop estimations have also been encouraging as against the sharp drop in current year’s crop size in both Brazil ad Argentina. The report makes a clear note of the fact that, SA old crop supplies would be drained off sooner than normal and this would exert pressure on the US exports. This has been reflected by way of increments to US exports as well strong demand from China, while EU demand is left unchanged in anticipation of further eco-political realignments that could unfold in the months ahead.
As far as the old crop balance sheet is placed, it is tilted towards the demand side with rise in US exports (as well as domestic crush) just a quarter prior to the end of the marketing year. As a result, US soybean stocks have been cut to 210mn bushels from the earlier 250mn bushels. This could be a psychologically a positive factor for the soy complex. Simultaneously, US soy oil balance sheet has been revised upward as a result of rise in production and poor demand in the wake of reduced consumption for bio diesel as energy prices recede. Rising stocks could weigh on the soy oil prices and with crude oil prices poised to stay mixed to weak in the short run, soy oil prices could be a laggard within the complex. Other major revisions pertain to deeper cuts to the South American soy crop with Brazil taking a 1mn cut to 65n tons and Argentina taking a 2.5mn ton cut to 42.5mn tons. As both these figures have already been discounted, fresh bullishness might be limited, while the underlying supply deficit scenario could offer lateral support to the prices moving ahead.
USDA impact assessment table