Soya Complex - October 2012: ‘Seemingly bullish, demand sustenance to be ascertained’

India Infoline News Service | Mumbai |

Soybean estimates were as expected with higher crop size, increased demand and nominal increase in US ending stocks.

USDA once again did not disappoint as it kept the recent upheaval (highly volatile gains) in the edible oil complex maningful. Soybean estimates were as expected with higher crop size, increased demand and nominal increase in US ending stocks. Soybean production was 100mn bu above the average trade guesstimates and 226mn bu above the USDA Sep estimate. The USDA also increased the planted and harvest acres alike by 1.1m acres. Soybean yields were revised upward to 37.8bu/acre from last month’s 35.3bu/acre. On surface these numbers could be deemed bearish but USDA raised its demand projections by 250mn bu with ending stocks raised to 130mn bu from last month’s 115mn bu. It may be noted that the stocks–to-usage remains historically tight at 4.4%. market is yet to ascertain the credibility of USDA’s demand projections which were ostensibly optimistic with exports risen by 210mn bu to 1,265mm bu  and crush by 40mn bu to 1,540mn bu. Globally, data is not very encouraging with world ending  stocks increased by 4.5mn tons to 57.56mn tons. The higher world stocks were result of higher US production and lower South American exports. USDA increased China imports by 1.5mn tons but carried it thru to ending stocks which were increased by 1mn ton. Brazil and Argentine production forecasts were unchanged at 81mn tons and 55mn tons respectively, but rested upon smooth planting pace and an extraordinary weather situation ahead into the marketing year. Overall, the USDA report is bullish from its ‘thumbs up’ approach as regards demand, while this needs to be ascertained, optimistic SA crop projections could validate the ‘scramble for soybeans’ that is soon expected to deluge the global markets. On the price front, prices are loitering near the recent lows and scouting for a bottom harping on the medium term bullish price prospects.


USDA monthly supply-demand impact assessment
 Key variables Oct
USDA
Sep
USDA
Abs chg
(Oct vs. Sep)
Impact Assessment
Crop Year 2011/12        
US Soybean Ending Stocks, Mn Bu 169 130 39.0 Late season increment to the stocks and largely inline with the Sep grain stocks report. With the new crop far below last year, rise in old crop carryin is insignificant.
US Soy oil stocks Mn Lbs
2,620 2,720 (100.0) Decline in stocks could add more to the pipeline supplies as new crop harvest still under way. Potentially bullish for medium term
World Veg Oil Ending Stocks, Mn Tons 15.6 14.2 1.4 Record high old crop stocks reasons out the price weakness witnessed sometime back. Warns of likely upward revisions to new crop stocks as the season progresses. Long term bearish.
Crop Year 2012/13        
US Soybean acreage, Mn Acres 77.2 76.1 1.1 Rise in acreage was within expectations (though not explicitly announced) and provides some respite as yields are dramatically low. No major impact.
US Soybean yield, Bu/acre 37.8 35.3 2.5 Yields, though at multi year lows, the ‘worst is over’ theory could be perceived to be bearish for short term. Surprises might be seen up to Jan’13 final yield report. Key dictator of short term trends
US Soybean production, Mn Bu 2,860 2,634 226.0
US Soybean crush, Mn Bu 1,540 1,500 40.0 Early season estimates and hence prone for revisions as the year progresses. Should be watched for domestic demand, as it might eat out into those ambitious export projections. On the contrary, prospective Brazilian soy crop could turn the export hopes down. Can be a game changer
US Soybean exports, Mn Bu 1,265 1,055 210.0
US Soybean Ending Stocks, Mn Bu 130 115 15.0 Still at multi year lows and would continue to be bullish as long as it doesn’t reach 250mn bu threshold mark. Potential game changer.
Source: USDA, India Infoline Research

 Key variables Oct
USDA
Sep
USDA
Abs chg
(Oct vs. Sep)
Impact Assessment
Crop Year 2012/13        
US Corn Yield, Bu/acre 122 122.8 (0.8) Multi year low yield levels could continue to provide bullish undercurrent for corn.
US Corn Ending stocks, 619 733 (114.0) Lowered old crop carryin, rationed exports and firm demand resulted in reduced stocks. Bullish for prices, till SA corn crop raises its head.
China Soybean imports in Mn Tons 61 59.5 1.5 Flat current year crop estimates (12.6mn tons) and burgeoning demand is justified with rising imports. However, variations could unfold should Brazil reap the best soy harvest ever.
World Soybean Ending Stocks, Mn Tons 57.5 53.1 4.4 Stock levels under 60mn tons are deemed to be positive for the market. Further revisions to be seen post SA crop plantings and yield prospects. Medium term game changer
World Soy oil Ending Stocks in Mn Tons 2.35 2.21 0.1 Justifiably low, but with burgeoning palm oil stocks (Malaysia and Indonesia), pressure on soy oil stocks might be short lived. No major positive impact.
World Veg Oil Ending Stocks, Mn Tons 12.83 11.54 1.3 Prone for further upside revisions and is already above the threshold level of 12mn tons. Higher CPO stocks could fill the oil bins as the season progresses.
Brazil soybean production, Mn Tons 81 81 -- With new crop sowings just commenced in Brazil, such high crop expectations are very premature and vulnerable for downward adjustment. Could turn potentially bullish in medium to long term. 
Source: USDA, India Infoline Research
 

Advertisements

  • Save upto Rs.2.67 lakh with Pradhan Mantri Awas Yojana ...Know more
  • Now Save Rs.3150 on your Demat Account ...Click here
  • Now get IIFL Personal Loan in just 8* hours...APPLY NOW!
  • Get the most detailed result analysis on the web - Real Fast!
  • Actionable & Award-Winning Research on 500 Listed Indian Companies.