farmgate: China And Your Soybean Revenue
The falling value of the US dollar against foreign currencies has again sparked the commodity market because of export potential. And with USDA raising its estimate of soybean exports to 1.3 billion bushels in the current marketing year, farm revenue will be dependent upon hungry humans and animals overseas. At least that was apparent in the Oct. 9 series of USDA reports.
USDA’s October Crop Report raised the forecast for soybean exports to 1.305 billion bushels, a record amount, in part because total production was increased to 3.250 billion bushels and a slight drop in price estimates will help spur interest of foreign buyers. The World Agricultural Supply and Demand Estimates reflected the increased interest by global importers, particularly China. With 40% of US soybeans being exported, a substantial amount of the $8 to $10 farmgate price range can be attributed to export trade.
This comes in the wake of increased world production, say USDA economists, “Global soybean production is projected higher with increases for the United States, Argentina, and Paraguay only partly offset by lower production for China. Argentina soybean production is raised 1.5 million tons to 52.5 million due to increased area as producers shift to soybeans from other crops including corn and sunflower seed. China soybean production is lowered 0.5 million tons to 14.5 million due to lower harvested area as producers shifted more area to corn.” And the economists believe global stocks of oilseeds will be increasing, “Global oilseed stocks for 2009/10 are raised 4.5 million tons to 66.0 million. Soybeans account for most of the change, with increases projected for the United States, Brazil, Argentina, and China.” Although Chinese oilseed stocks are growing, USDA’s estimates of its imports are also being increased, both for the old and new marketing year.
Along with the estimated 1.305 billion bushels of soybean exports from the US during the current marketing year, USDA also forecasts the export of 3.250 billion pounds of soybean oil and 9.600 million tons of soybean meal. Both reflect no change from the September Supply and Demand report. However, soybean oil exports would be a 47% increase over the 2008-09 marketing year, and meal exports would be an 11% increased over last year.
Argentina, which exported about 5.9 million metric tons of soybeans last year will increase that to about 9.7 million tons after its crop is harvested early next year. However, soybean meal exports will increase from 24 to 27 million metric tons. Brazil exported about 30 million metric tons last year, but that may drop to 24.5 million tons this year. At the same time, Brazilian soybean meal exports that were 13 million tons last year, are estimated at 12 million tons for the current marketing year.
As previously mentioned, China will be a major purchaser, and will buy more than one billion bushels of soybean from world suppliers, according to the latest USDA estimates. The European Union will buy over 300 million bushels, and Japan will buy about 100 million bushels of soybeans.
While US ending stocks of soybeans in August of 2010 are expected to be 230 million bushels, Brazil is expected to have more than twice that supply and Argentina will have about four times that level of carryover supplies of soybeans.
Summary:
While USDA raised its estimate of US soybean production to 3.250 billion bushels, it also raised its estimate of soybean exports to 40% of the new crop. While the larger supply will result in a slightly lower price, the falling value of the US dollar is making US commodities attractive once again to foreign buyers. China, which raises a large amount of its own soybeans, will be buying as much as one billion bushels from the US and from South America. For soybean farmers, exports will be a major part of their market price, and China will be a substantial contributor to it.
Posted by Stu Ellis on October 12, 2009 12:24 AM to farmgate