Oilseeds. World Markets and Trade. July 2019 - USDA July 11, 2019
Market Uncertainties of 2018/19 Haunt 2019/20 Prospects
This month, U.S. soybean exports for 2019/20 are lowered from 53.1 million tons to 51.0 million despite near-record supplies. The reduction is driven by a sharp cut to U.S. soybean production (by 8.3 million tons to 104.6 million) due to difficult planting conditions. These factors, paired with large Brazilian supplies and uncertainties over China’s demand caused by the outbreak of African swine fever and the trade tensions, will continue to fuel market uncertainty.
For 2018/19, sales and shipments of U.S. soybeans to China are drastically low, but they are taking place. For example, on June 27, a sale of 544,000 tons was reported and represents the largest weekly sale to China since late March. In addition, shipments of U.S. soybeans and Brazilian soybeans have swapped schedules; U.S. shipments at this time of the year are uncommon as China has normally shifted to buying from South America by this point. Weekly shipments of U.S. soybeans have averaged about 360,000 tons to China since February, which is higher than the average over the past 5 years of 230,000 tons per week for the same time-period. Even as the United States seeks to catch up on exports, Brazil saw record exports for the early half of the marketing year (October to February). Although its exports are reduced this month by 1.3 million tons to 77.3 million, the large early sales and expanded market share in China are driving exports to a record year for 2018/19.
In June, Brazilian soybeans still commanded a premium port price of $367/ton (Paranagua) compared to the United States at $351/ton (FOB Gulf). Although these prices are lower than last year’s prices during this time of the year, they are doing little to spur China’s demand. The United States is also shipping soybeans to Mexico, Japan, Indonesia, Egypt, and the EU, partly offsetting lost shipments to China and to meet demand elsewhere. The market factors of 2018/19 combined with the challenging trade environment will add a new dimension and heightened uncertainty to forecasts into 2019/20.
PROJECTION FOR 2019/20
Global oilseed production is forecast at 586.0 million tons, down 11.7 million from the June forecast and 2.7 percent less than 2018/19. Soybean production is projected at 347.0 million tons, down 8.4 million tons from June and 4.4 percent from last year. Excessive rainfall delayed plantings and has set back U.S. soybean production. Reductions in Ukraine and Canada soybean production are offset by higher Uruguay production. Cottonseed is projected slightly higher while reductions are forecast for peanut, rapeseed, and sunflowerseed. Copra and palm kernel remain unchanged. Soybean imports are forecast to up from the 2018/19 depressed level but remain unchanged from June. Brazil is still projected to be the leading soybean exporter in 2019/20 at 76.0 million tons. Total global oilseed exports are increased 200,000 tons from last month representing 0.7 percent growth from 2018/19. U.S. ending stocks are lowered by 8.2 million tons this month, but global ending stocks still demonstrate year-over-year growth. Trade of soybean meal and soybean oil are both forecast up on growing global demand. The projection for the U.S. season-average farm price for soybeans is raised by $0.15 to $8.40.
OVERVIEW FOR 2018/19
Global 2018/19 oilseed production is up by 1.0 million tons this month to 602.4 million. Greater soybean production in Uruguay and cottonseed production in India more than offset lower production in South Africa cottonseed and soybeans and Uzbekistan cottonseed. Global soybean exports are forecast slightly higher due to a 1-million-ton boost in Argentina and an 850,000-ton increase in Uruguay offset by a 1.3-million-ton reduction in Brazil. Soybean imports are also slightly higher with a 300,000-ton increase for the European Union. Global soybean ending stocks are boosted tons this month higher stocks in Brazil. The U.S. season-average farm price for soybeans remains unchanged at $8.50 per bushel.
The export price spread between the United States and South America generally continued this month. U.S. soybean export bids in June, FOB Gulf, averaged $351/ton, up $25 from May. Brazil Paranagua averaged $367/ton, up $29 from May. Argentina Up River FOB averaged $347/ton, up $27 from last month. U.S. soybean meal export bids (FOB Gulf) in June averaged $359/ton, up $25/ton from May. Brazil Paranagua FOB averaged $334/ton, up $22 from May while Argentina Up River FOB averaged $331/ton, up $20 from the previous month. The short crop and the weather conditions in the United States caused prices to rise across the board. Despite higher U.S. prices, South American premiums remain and are currently approaching 5 percent.
For the week ending July 4, 2019, U.S. 2018/19 soybean export commitments (outstanding sales plus accumulated exports) to China totaled 14.5 million tons compared to 28.1 million a year ago. Total commitments to the world were 48.6 million tons, compared to 57.5 million for the same period last year. Accumulated soybean exports were at 38.5 million tons, down 11.8 million from last year. Accumulated soybean exports to China were at 8.7 million tons, 18.7 million tons lower compared to last year. Shipments to the rest of the world were at 29.8 million tons, 6.9 million above last year for the same period.