As the global supply of soy for marketing year 21/22 is tight, buyers need to maximize the value of their purchase.
In its May 12 World Agricultural Supply & Demand Estimates report, the U.S Department of Agriculture (USDA) revised world soybean ending stocks down 4.34 million metric tons (MMT) to 85.2 MMT — the smallest absolute stocks figure since the 2015/16 marketing year.
“Prices are going to be high,” says Jim Sutter, U.S. Soybean Export Council CEO. “We’ve heard that, and buyers see it today.
“I encourage people to understand how to maximize the value of U.S. Soy. You don’t want to over formulate with soybean meal at a time like this. Our team is here to work with you to help you maximize that value and capitalize on the amino acids, energy levels, or whatever you’re looking to capture.”
Looking at South American production, USDA cut Argentine production 1.5 MMT to 42 MMT, while Brazil and Paraguay estimates remained. With this cut, total production across Brazil, Argentina, and Paraguay is now more than 32 MMT lower than USDA’s expectations in December.
As South American production has been challenged, the exports of U.S. Soy have strengthened. As such, USDA increased its current year (MY 21/22) export projection for U.S. Soy by 25 million bushels (0.7 MMT) to 2.14 billion bushels (59.9 MMT) and decreased ending stocks by 25 million bushels, dropping carryout to 235 million bushels (6.4 MMT).
Other revisions included a shift of 200 million short tons from export to domestic use for soybean meal. For oil, old crop volume did not change, but USDA increased price projection by 5 cents to 75 cents per pound.
“Export demand will be strong … and export capacity will likely be tight,” says Sutter, who hosted the U.S. Soy World Agricultural Supply & Demand Estimates webinar the evening of the report’s release. “While the United States has a very reliable system, line-ups can develop. I encourage buyers around the world to lock in logistics and supply — that doesn’t mean you need to fix the price, but you can work with U.S. exporters to get purchases on the books so your supply is lined up.”
Sutter was joined on screen by Arlan Suderman, chief commodities economist for StoneX Group Inc.; Mac Marshall, vice president of market intelligence for USSEC and the United Soybean Board; and Xiaoping Zhang, USSEC regional director for Greater China.
Suderman adds that the United States needs to ship about 21.1 million bushels per week to hit USDA’s export projects.
“For the past three months, my export target has been 2.225 billion bushels,” he says. “To hit that we need to ship about 25.5 million bushels per week. I think that’s attainable.”
As we look ahead to the new marketing year, both USDA and Suderman see a rebound in world soybean production.
Looking Ahead: New Crop and New Year
USDA projects world soybean production at 395 MMT, a 45 MMT increase from the current marketing year.
Marshall reports that roughly 39 MMT of this increase are concentrated in South America as it comes back from a drought year and Brazil continues expanding its production area.
Increased global production means an increase in global ending stocks, which are expected to grow by more than 14 MMT.
Meanwhile, global demand is forecast at 377 MMT, up more than 14 MMT from the prior season.
Looking at U.S. soybean production, USDA kept its March forecast of 91 million acres to be planted with a trend yield of 51.5 bushels per acre. These numbers reflect a 2022 U.S. Soy crop of 4.6 billion bushels (126 MMT).
With the growth in production, USDA expects some inventory build to 310 million bushels (8.4 MMT).
Even with the increased production, USDA projects prices to be strong, and Marshall notes the new crop futures curve supports this projection.
Demand for U.S. Soy, both crush and exports, are projected to increase relative to the prior season with crush estimated at a record 2.255 billion bushels.
“We’re starting to see some of the impacts of expanding crush capacity be reconciled in the balance sheets,” Marshall highlights. “As crush increases, USDA projects some price relief for the co-products of both soybean meal and oil.”
From this, exports of U.S. soybean meal are expected to increase slightly while oil exports decrease. For the soybean oil biofuels use, USDA shows a year-on-year increase of 1.3 billion pounds.
On the surface this looks like a lot, Marshall says, but it’s important to recall that at this point last year, USDA’s projection for soybean oil use in biofuels was also 12 billion pounds – and was subsequently revised down several times.
Overall, global demand for soy continues grow.
“Consumers around the world depend on it,” Sutter says. “Whether raising aquaculture or other livestock, producers need soy.
“And our U.S. soybean farmers are reacting to that. They continue to plant their crop sustainably, and you see that they have more acres already planned and maybe even more acres of soy coming [given the late start for corn]. U.S. Soy farmers deliver solutions to meet the needs of the world’s consumers.”
For more details and discussion from the webinar, which included a special spotlight on China, be sure to check out the video above.
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