Soya Complex update:‘Crop yield risks galore, weather plays trump card’ – July 2012

India Infoline News Service | Mumbai |

WASDE has let the alarm bells ringing as weather occupies center-stage across the oilseed producing and consuming regions.

The latest World Agriculture Supply Demand Report (WASDE) has let the alarm bells ringing as weather occupies center-stage across the oilseed producing and consuming regions. Market has been witnessing a series of weather reports indicating the intensity of drought in the US mid west and the same had led to private agencies pulling out lower yield estimates for the new crop. The USDA report has drastically cut its soybean yields. Major revision in the USDA report include a reduction in the projected bean ending stocks for 2011/12 to 170mn bu vs. 175mn bu in June, drastic cut in new crop yields to 40.5bu/acre vs. trendline yields of 43.5bu/acre and 5% reduction in the world soybean ending stocks.  The 2012/13 US soybean ending stocks was also reduced to 130mn bu from 140mn bu in the June report. USDA had to cut export estimates for new crop to keep the stocks at pipeline level. The total domestic production is just above 3bn bu, same as current year. Global soybean ending stocks for old crop were estimated at 52.5mn tons, which was slightly below the average pre-report estimate of 52.75mn tons and down 0.85 mn tons from the June WASDE. Corn balance sheet provided a bullish overture for the grains complex with humungous cut in the yields as well as ending stocks. On the whole, USDA report looks to be preempting and preparing for an extremely new crop tight balance sheet, while much rests on the weather developments to revive those greener harvest numbers. 

   

USDA impact assessment table
 Key variables July
USDA
June
USDA
Abs chg
(July vs. June)
Impact Assessment
Crop Year 2011/12        
US Soybean Crush, Mn Bu 1675 1660 15 No major direct impact seen as focus shifts towards new crop. However, it would be instrumental in estimating the quantum of demand rationing for new crop.   
US Soybean Exports, Mn Bu 1340 1335 5 It would be instrumental in estimating the quantum of demand rationing for new crop. Reiterates strong Chinese demand.
US Soybean Ending Stocks, Mn Bu 170 175 (5) Well below the threshold 250mn bu and hence positive for the prices. No fresh bullishness.
US Soy oil stocks Mn Lbs 2660 2590 70 Draws significance as the next year stock predictions are well below the current year.
Crop Year 2012/13        
US Soybean acreage, Mn Acres 76.1 73.9 2.2 Acreage is same as per June’12 plantings report. Could come into the limelight, in case weather turns on the good fortunes.
US Soybean yield, Bu/acre 40.5 43.9 (3.4) Yields at a 3year low are a definite cause of concern. However, with such drastic cut too early in the season, further cuts might be limited. Should watch the adjustments in the impending reports. Overall bullish.
US Soybean production, Mn Bu 3050 3205 (155) Ironically, it is similar to current year’s crop despite higher acreage, as yield estimates drop. Potential ti become a bullish trigger assuming nominal demand growth on yoy basis.
US Soybean exports, Mn Bu 1370 1485 (115) Despite a deep cut in exports, it is still higher than current year. With lower supplies, demand rationing is a compulsion. Soy tightness assumes an all-pervasive significance.
US Soybean crush, Mn Bu 1610 1645 (35) Lower crush is to accommodate lesser crop. Domestic demand could be stressful, ‘ceteris paribus’.  
US Soybean Ending Stocks, Mn Bu 130 140 (10) Multi year low stocks leave little room for supply threats. Potentially bullish for medium term.
US Soy oil Ending Stocks, Mn Lbs 2005 2135 (130)
US Corn Yield, Bu/acre 146 166 (20) Massive drop in yields as Mid west passes through one of the worst droughts. As yield estimates are far more bullish than expected, it remains to be a positive factor for the prices.
Source: USDA, India Infoline Research


 Key variables July
USDA
June
USDA
Abs chg
(July vs. June)
Impact Assessment
Crop Year 2011/12        
China Soybean Imports in Mn Tons 57.5 57 0.5 Conforms to the weekly export sales data and stands neutral to positive as prices have already discounted it.
Brazil Soybean Production in Mn Tons 65.5 65.5 -- South American supplies are almost exhausted, with the season drawing to a close in a couple of months. Limited short term impact.
Argentina Soybean Production in Mn Tons 41 41.5 (0.5)
World Veg Oil Ending Stocks, Mn Tons 13.36 13.49 (0.13) Stocks above 13mn ton is a better-off scenario and acts as a fair buffer for new crop supply tightness. No major impact as old crop year draws curtains.
Crop Year 2012/13        
US Corn Yield, Bu/acre 146 166 (20) Massive drop in yields as Mid west passes through one of the worst droughts. As yield estimates are far more bullish than expected, it remains to be a positive factor for the prices.
US Corn Ending stocks, 1183 1881 (698) The earlier expectations of a likely revival in stocks after hitting rock bottom levels are now shattered. Low stocks could potentially be a medium term trigger for a rally.
China Soybean production in Mn Tons 12.6 12.6 -- Lower crop estimates would act as an underlying support for better import demand prospects, which are reportedly high.
World Soy oil Ending Stocks, Mn Tons 2.23 2.24 (0.01) Sharp drop from current year’s 3m tons, which is a positive factor for prices.
World Soybean Ending Stocks in Mn Tons 55.66 58.54 (2.88) Multi-year low stocks are a bullish trigger for prices particularly with El Nino weather threat looming large.
World Veg Oil Ending Stocks, Mn Tons 11.69 12.66 0.97
Source: USDA, India Infoline Research
>Source: USDA, India Infoline Research

 

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