Soybean and Oilseed Meal Import Prospects Higher as Severe Weather Damages EU Crops

The 2018/19 oilseeds production forecast for the European Union has been reduced significantly since USDA’s first projections published in May. Although prospects for sunflowerseed have improved, lower rapeseed yields are dragging production below last year. Additionally, EU wheat and coarse grains crop projections are cut again this month resulting in expected lower feed grains consumption. Reductions in rapeseed and coarse grain supplies can be offset with higher rapeseed and corn imports; reduced availability of feed-quality wheat may be partially offset with imported soybeans and oilseeds meals. For that reason, 2018/19 soybean and soybean meal import projections are boosted to 15.8 and 18.5 million tons, respectively. Additionally, rapeseed and sunflowerseed meal import forecasts are adjusted higher following improved production prospects for both crops in Ukraine.

Meanwhile, the 2017/18 EU soybean import forecast remains unchanged at 14.1 million tons. Lower U.S. soybean prices vis-à-vis Brazil, a result of China’s duties imposed on U.S.-origin soybeans, have contributed to a surge in EU imports from the United States. While China substitutes U.S. soybeans by maximizing purchases from Brazil, the rest of the world is taking advantage of competitively priced U.S. supplies and the improved crush margins that have resulted. The recent shift to U.S. origin is likely to continue as long as crush margins remain attractive. However, it is important to note that the European Union is a mature market with limited capacity to expand. According to industry contacts, oilseeds processors are crushing at or near capacity which limits soybean import growth.

China 2018/19 Soybean Consumption Prospects Down Further; 2017/18 Import and Crush Lowered. In line with this year’s reduced crush, 2018/19 soybean crush is lowered by 1.5 million tons to 95.0 million. USDA forecasts China oilseed meals consumption at 92.3 million tons (soybean meal-equivalent basis), which represents slowing growth in annual consumption at 3.2 percent. This is below last month’s estimate of 3.8 percent. 2017/18 Crush Update: Large pork supplies that are pressuring prices, along with higher soybean import prices that are eroding crush margins, have significantly slowed soybean processing. As a result, USDA further lowers China’s 2017/18 soybean crush this month to 91.0 million tons. Lower meal output is partially offset with higher fishmeal and sunflowerseed meal imports. In 2017/18, China is projected to consume 89.5 million tons of oilseed meals (soybean meal-equivalent basis), 4.0 percent above last year. This is below last month’s forecast of 4.6 percent annual growth. 2017/18 Import Update: Between October 2017 and July 2018, China imported nearly 77.0 million tons of soybeans, almost replicating last marketing year. Based on available trade-to-date information, USDA is cutting 2017/18 China soybean imports by 1.0 million tons to 96.0 million. Even though, soybean arrivals in recent months have been below expectations, partly in response to port congestion, USDA still expects robust imports in August and September, mostly Brazilian origin.

OVERVIEW

2018/19

Global oilseed production is forecast higher this month at nearly 603.0 million tons. Soybean production is up at 367.1 million tons on gains in the United States. The rapeseed crop forecast is lower this month as reductions for the European Union exceed gains for Russia and Ukraine. The sunflowerseed production forecast is significantly higher this month on gains for Ukraine, Russia, the European Union, Moldova, Serbia, and Turkey. Global soybean imports are raised, driven by projected gains for the European Union. Soybean exports are up with projected increases for the United States and Serbia. The global stocks forecast is significantly higher this month on larger supplies in the United States, Argentina, and China that more than offset reductions for Brazil. The U.S. season-average farm price for soybeans is projected down $0.35 at $8.90 per bushel.

2017/18

Global oilseed production is slightly lower this month at 573.4 million tons following reduced palm kernel crop estimates for Malaysia. Global soybean imports are down this month on lower shipments to China. Exports are higher with gains for the United States and Brazil. Global soybean ending stocks are down this month on reductions for the United States and Brazil offsetting gains in Argentina. The U.S. season average farm price for soybeans is unchanged at $9.35 per bushel.

SOYBEAN AND SOYBEAN MEAL EXPORT PRICES

U.S. soybean export bids in July, FOB Gulf, averaged $335/ton, down $29 from June. In comparison, FOB Brazil Paranagua averaged $393/ton, up $7 from last month. FOB Argentina Up River averaged $380/ton, down $2 from last month. Prices in the United States continued to fall at the beginning of July in anticipation of a 25-percent tariff duty on U.S. soybeans to China and uncertainty regarding its impact on trade. U.S. soybean FOB prices reached a minimum on July 13 and have since risen, supported by year-over-year increases in exports and domestic crush.

U.S. soybean meal export bids in July, FOB Gulf, averaged $390/ton, down $17 from June. FOB Brazil Paranagua averaged $376/ton, down $14 from last month. FOB Argentina Up River averaged $376/ton, down $9.

EXPORT SALES

For the week ending August 2, U.S. 2017/18 soybean export commitments (outstanding sales plus accumulated exports) to China totaled 27.9 million tons compared to 36.3 million a year ago. Total commitments to the world are 58.6 million tons, compared to 60.7 million for the same period last year.