World soybean customers look to U.S. for supply

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There are going to be more soybeans grown across the United States this year, but that increase likely will not keep up with demand due to disappointing production in Argentina and Brazil. The scenario will mean U.S. soybean supplies may fall to about two weeks of inventory, according to analysts.

“There are several factors leading to this perfect storm for soybeans,” said Todd Davis, American Farm Bureau Federation senior economist. Davis points to a disappointing harvest in South America as well as the expected low inventories.

The outlook is for old-crop soybean inventories to tighten for the current 2011/2012 marketing year. “For the next crop the outlook is for a historically-low stocks-to-use ratio of 4.4 percent,” said Bill Nelson, Doane senior economist. “Production will increase, but the world will depend on the U.S. until the next South American harvest.”

Getting there, however, may be the problem. The world numbers show a sharp decline in global soybean production between 2010/2011 and 2011/2012. “Last summer’s disappointing U.S. soybean crop followed by drought in South America resulted in a major hit to the supply side,” Nelson said. “The easy rationing of use wasn’t sufficient to stabilize the supply/demand and prices had to rally to slow demand.”

Substantial increases in acres for soybeans are anticipated in South America due to expected higher prices. “USDA forecast Brazil soybean planting next year at 26.5 million hectares compared to 25.0 million hectares this past crop,” according to Nelson. “For Argentina, the comparison is 19.7 million next versus 17.8 past crop.”

It may be eight months before final South American planting figures are tallied. Most soybean planting in Brazil occurs in October and November and for Argentina, the planting is mostly in November. “In addition, there are double cropping opportunities in both countries that will result in some plantings as late as January,” Nelson said.

Meanwhile, demand will not let up. Increased demand for soybeans, most notably from China, is expected for use in livestock feed. “Based on higher Chinese demand, USDA increased its forecast of U.S. exports to that country, but it still may be too low,” Nelson said. “Chinese government sources are looking at soybean imports of 58 to 59 million metric tons this crop year.”

The world will be watching closely at the U.S. soybean acreage and growing season. “My guess is that the majority of analysts expect final soybean acres will exceed USDA’s 73.9 million estimate,” Nelson says. He thinks final U.S. soybean planting may hit 75 million to 76 million acres, maybe even more. “How that could come about is by more acres of winter wheat double-cropped to beans,” he said. “The USDA forecast of 73.9 million acres includes assumptions for that, but with the wheat harvest expected earlier than normal, there is the potential for more farmers than normal to double crop. “

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