Global Soybean Consumption Drop in 2012-2013 as Prices Harness Demand

Global soybean consumption will drop about 3 million metric tons in 2012-2013 as record prices harness demand for the oil made from the oilseed for food and biofuel. Import demand will shift to more attractively priced palm oil next year. This will result in seizable increase in exports from Indonesia and Malaysia, reducing their stockpiles.

The rally in soybean meal prices have cooled demand among livestock producers and poultry meat production is already declining. Soybeans rose to a record $17.89 a bushel also on Sept. 4.

Higher prices of oils have affected consumption in the food sector but a larger impact is stemming from a slowdown in biodiesel sector. The growth rates in usage of oils and fats in biodiesel consumption are going to slowdown further in 2013.

Soybean Prices Rally, Futures Delivery May 2012 Advanced

Soybean extended rallies to the highest prices since September on speculation that China may boost purchases from the U.S., the biggest producer of soybean crops. Soybean imports may rise more than 20 percent in the first half of 2012, Grain.gov.cn said March 12.

Soybeans may rally next week as unusually warm, dry weather and drought conditions in parts of the northwestern Midwest may threaten this year’s crops and encourage farmers to withhold supplies left from last year’s harvest, Tim Hannagan, a grain analyst for PFT Best Inc. in Chicago, said in a telephone interview.

Soybean futures for May delivery advanced 0.4 percent to $13.74 a bushel in Chicago, after touching $13.775, the highest since Sept. 15. The oilseed rose 2.7 percent for the week, the fifth straight and the longest weekly rally since November 2010.

“The export-pipeline supply of soybeans will shrink the next few weeks because farmers will fear the weather will prevent building stocks to more comfortable levels,” Hannagan said. “March is a month when investors pour money into the grain markets before the start of the growing season.”

Soybean futures for May delivery gained 0.2 percent to $13.7175 a bushel in Chicago, after touching $13.775, the highest since Sept. 15.

Soybean Futures Prices Rally, May 2012 Delivery Rose per Bushel

CBOT soy futures rally, extending recent gains on strong exports and worries about Brazil's crop. The USDA announced a huge export sale to China, which although already known given a Thursday signing ceremony, nonetheless added to optimism that the U.S. would continue to see increased business as South America production falters in hot, dry weather. The crop in Brazil is a particular concern. Traders say recent gains in soybeans versus corn could result in more soy acres than expected this spring. CBOT March soybeans end up 9 1/4c to $12.67 1/2 a bushel, up 3.1% for the week. CBOT March Soybean Oil up 0.35c to 53.40 cents/lb, while March soybean meal ends up $1.70 to $332.50 per short.

Soybeans for May-delivery rose 0.9 percent to $12.765 a bushel. The most-active contract is set for a 3.9 percent gain this week, the biggest since the five days ended Oct. 14.

Argentina’s soybean harvest may reach 43.5 million tons to 45 million tons, the Agriculture Ministry said yesterday. That compares with a 48 million-ton forecast by the U.S. Department of Agriculture on Feb. 9.

“Recent developments in the soybean market have so far buttressed” the bullish view on the oilseed in 2012



Private exporters reported to USDA export sales of 116,000 metric tons (MT) of soybeans to China during the 2011-12 marketing year. The marketing year for soybeans began Sept. 1.

USDA issues both daily and weekly export sales reports to the public. Exporters are required to report to USDA any export sales activity of 100,000 metric tons or more of one commodity, except 20,000 tons for soybean oil, made in one day to one destination, by 3 p.m. Eastern time on the next business day following the sale. Export sales of less than these quantities must be reported to USDA on a weekly basis.

Soybean Futures Prices 2012 Rose on CBOT as US Harvest decline

Soybean futures prices for January 2012 delivery rose 0.7 percent to close at $11.755 a bushel at 1:15 p.m. on the Chicago Board of Trade. Yesterday, the price touched $11.67, the lowest for a most-active contract since Oct. 10. The oilseed, down 3.7 percent this week, has dropped 16 percent this year.

Soybeans rose on speculation that the U.S. harvest declined more than the government estimated after dry weather during the summer lowered yields. Corn fell as producers of livestock feed shifted to cheaper wheat.

The U.S. Department of Agriculture cut its forecast on this year?s soybean crop for a second straight month on Nov. 9, saying production will fall 8.5 percent to 82.9 million metric tons. Some fields from Minnesota to Tennessee were the driest ever in August, data from National Climatic Center show.

?The soybean crop may get smaller,? Jim Gerlach, the president of A/C Trading Inc. in Fowler, Indiana, said in a telephone interview. ?There is some demand surfacing after the recent drop in prices.? Last year, the U.S. was the world?s leading exporter of soybeans and corn.

Soybean Taxes and Tariffs regulation

The soybean taxes and tarrifs, policy regulation can often work wonders and going by China?s efficient handling of the same in soy sector can be a lesson for many; especially Brazil.

China is the world?s biggest importer and consumer of soybeans and accounts for 60% of world?s total imports. Its appetite for soybeans is so huge that even crushers in US--the country is the top producer of soybean-- are unable to source their requirements.

?China?s surge in soybean imports mean that US processors must pay higher prices for soybeans relative to the domestic price for soy meal, which has contributed to processor margin contraction.? says a Rabobank report.

Despite this robust demand increase, China?s domestic production has remained relatively stable near 15 million tonnes, as soybeans are not considered to be a strategic crop, unlike corn, Wheat and rice.

Keen to support its domestic crushing industry, China introduced a differential import tax structure in 1998 to encourage imports of whole soybeans rather than Soymeal and soy oil.

Look at their tax regime for soy complex:

--3 percent import tariff plus 13 percent value-added tax on soybeans

--5 percent import tariff plus 13 percent value-added tax on soymeal

--9 percent import tariff plus 13 percent value-added tax on soy oil (same as on palm oil)

This tax structure facilitates imports of soybeans while discourage soymeal and soyoil imports. The crushers are thus benefitted, though overcapacity is a scourge.

In 2010, Rabobank estimates that China had a total soybean crushing capacity of approximately 100 million tonnes and crushed 55.8 million tonnes. To address its overcapacity problem, China?s National Development and Reform Commission published a directive titled ?Guideline of Pushing a Healthy Development of Soybean Processing Sector? in September 2008.

The Guideline suggested decreasing capacity to 75 million tonnes by 2010 and to 65 million tonnes by 2012. The Guideline also stipulates that a single company may not expand once it accounts for 15 percent of national production volume.

It should be understood that approval for expansion will tend to favour state-owned crushers under this policy. To date, the Guideline has been unsuccessful at shrinking capacity. However, it has prevented foreign companies from green field or merger and acquisition (M&A) expansion, instead forcing them into lease agreements with local crushers.

Needless to say, industries thrive in this ambience.

The case of Brazil

Brazil?s export taxes on soybeans and soybean products were abolished with the introduction of the Kandir Law in 1996. Prior to the Kandir Law, Brazil taxed soybean exports at 13 percent and Soymeal and soy oil exports at 10 percent.

Domestic crushing was incentivised and the industry expanded crushing capacity. After differential export taxes were removed in 1996, Brazil?s soymeal and soy oil exports declined sharply as a percentage of the world export market while its soybean exports showed a steady increase as a percentage of the world export market. The decline in soymeal exports also reflects growing domestic meal demand. The legacy of Brazil?s differential export tax was excess crushing capacity and compressed margins, but the industry has now grown beyond this, especially with continued growth in animal protein production and new incentives for biodiesel.

What remains of Brazil?s soybean tax system is the Tax on Movement of Goods and Services, or ICMS.

ICMS is administered by each individual state in Brazil and is one of the country?s primary tools for generating state tax revenues. As such, the tax has many entrenched supporters among state governments, even though it is complicated and does not serve the strategic interests of the industry or the country as a whole. It works as follows:

--Soybeans are taxed at 12 percent each time they cross a state border

--Soymeal and soy oil are not taxed for crossing state borders

--Exports are not taxed

In principle, Brazil?s intention is to tax soybeans at a total rate of 12 percent. The complication arises because there is little integration between taxing authorities in the different states. As a result, the 12 percent state tax is cumulative unless a transporter is sophisticated enough to use legal means to collect overpayment credits. This can be an expensive and time-consuming exercise.

Soybean Prices Future 56 USD Trading Range

Soybean prices continue to move erratically in a very wide range. Just in the past week, both May 2011 soybean futures had a $.56 trading range. As the markets make the transition from old crop to new crop dominance, a lot of factors are influencing price expectations.

Soybeans, the Census Bureau soybean crush report released on April 28 revealed that the March 2011 crush was about 10 percent smaller than that of March 2010. Through the first 7 months of the 2010-11 marketing year, the crush was 7.4 percent smaller than the crush during the same period last year. For the year, the USDA has projected a decline of 5.8 percent. Last year, the crush was unusually large in the first half of the year and declined rapidly from April through August. The seasonal decline may be less pronounced this year. Still, the crush for the year may fall marginally short of the current USDA projection of 1.65 billion bushels.

The pace of soybean exports and export sales has declined sharply and export inspections during the weeks ended April 21 and 28 fell below the weekly rate needed to meet the USDA projection of 1.58 billion bushels for the year. Reports of on-going measures in China to cool economic expansion, along with large South American supplies, suggest a continued slow rate of exports.

Expectations about the 2011 U.S. soybean crop have centered on some planting delays for corn and the implication for soybean acreage. With corn planting likely to continue through May, if needed, there is no strong indication yet that planted acreage of soybeans will deviate substantially from March intentions.

Delivery Corn Prices Gains while Soybeans Advanced on Speculation

Delivery corn prices for March gained as much as 0.5 percent to $6.625 a bushel in Chicago before trading at $6.615 at 11:54 a.m. Singapore time. Yesterday, it rose as high as $6.6275, the highest price for the most-active contract since July 17, 2008. March-delivery soybeans gained 0.9 percent to $14.255 a bushel.

Corn gained to near a 30-month high and soybeans advanced on speculation that imports by China may expand as the yuan appreciates against the dollar, and on optimism its trade relations with the U.S. will improve.

The yuan rose to a 17-year high against the dollar yesterday before Chinese President Hu Jintao?s meeting with President Barack Obama. Hu arrived in Washington yesterday for his first state visit to the U.S.

?The Hu Jintao visit sparked speculation of a revival of China?s corn imports from the U.S.,? Chung Yang Ker, an analyst at Phillip Futures Pte., said by phone from Singapore. ?The U.S. may also play a bigger role? in meeting China?s soybean import needs, he said.

The visit may improve trade relations that have been strained recently, Ker said.

China, the world?s biggest grains user, began in December an anti-dumping investigation into U.S. shipments of dried distillers? grains, a by-product of corn-based ethanol that?s used in animal feed. Before the investigation, the U.S. filed a complaint at the World Trade Organization against China over support for its wind-energy manufacturers.

U.S. Export Sales

Wheat futures rose for a second day as import demand expands, while adverse weather continues to threaten crops in some of the world?s biggest producers.

March-delivery wheat gained as much as 1.2 percent to $8.03 a bushel in Chicago before trading at $8.0075.

U.S. exporters sold 145,000 metric tons of hard-red winter wheat to Turkey for delivery in the 2010-2011 marketing year that began June 1, the U.S. Department of Agriculture said yesterday. As of Jan. 13, U.S. authorities have inspected 700.7 million bushels of the grain for export, up 36 percent from a year ago, the U.S. Department of Agriculture said yesterday.

Conditions in Kansas, the largest winter-wheat state, ranged from abnormally dry to severe drought, data from the University of Nebraska at Lincoln show. In China, about 4 million hectares of crops have had up to 90 percent less rain than last year, the Xinhua News Agency said. Floods in Australia have delayed shipments and reduced crop quality.

?That sparked concerns that the drought is going to hit China?s crops,? Ker said. ?That may boost imports.?

Ukraine?s wheat harvest fell 19 percent to 16.8 million metric tons in 2010, the State Statistics Office said yesterday. The USDA forecast on Jan. 12 that Ukraine?s output will decline to 17.2 million tons this season, from 20.9 million tons in the previous season.

?Whatever happens in the Black Sea region is a supportive tone to the wheat market,? Ker said. ?These are news that are going to push wheat prices beyond $8 a bushel.?

Soybeans Climb Corn Futures Jump on Bets USDA Will Cut Output Forecast

Corn rose for a second straight session on speculation that the government will reduce its U.S. crop forecast next month. Soybeans also gained. Changing expectations by U.S. corn farmers contributed to a surprising cut in a production forecast this month, the Department of Agriculture said yesterday. Prices jumped to a two-year high on Oct. 13 on mounting speculation that the government will again lower its outlook in its next report on Nov. 9.

?People are looking for a further cut in U.S. corn production, and that will force end-users to increase purchases? as inventories shrink, said Greg Grow, the director of agribusiness at Archer Financial Services Inc. in Chicago.

Corn futures for December delivery rose 5 cents, or 0.9 percent, to $5.7375 a bushel at 12:52 p.m. on the Chicago Board of trade. The price, which rose 33 percent in the third quarter, touched $5.88 on Oct. 13, the highest since Aug. 29, 2008.

On Oct. 8, the USDA cut its corn-crop estimate for the second time in as many months, predicting a 3.4 percent drop in the domestic harvest. U.S. reserves before the next harvest are forecast to fall to the lowest since 1997.

While farmers will collect the most soybeans ever, the total will be 2.2 percent less than forecast in September, the USDA said earlier this month.

?Selling Every Bushel?

?Even with a record soybean crop, we are selling every bushel, led by Chinese demand,? Grow said.

The country will boost imports of the oilseed by 65 percent this month compared with a year earlier, the China National Grain & Oils Information Center said on Oct. 21.

Soybean futures for January delivery rose 2 cents, or 0.2 percent, to $12.32 a bushel in Chicago. Earlier, the commodity touched $12.36, the highest level since June 2009.

Before today, the commodity used to make animal feed and cooking oil, gained 36 percent since July 1.

Corn is the biggest U.S. crop, valued at $48.6 billion last year, followed by soybeans at $31.8 billion, government figures show.

Agricultural Commodities Future Prices in China Surged by Exchange Limits

Agricultural commodities include corn, soybean and cotton futures prices in China surged by exchange limits today, tracking gains in U.S. markets, as a weaker dollar boosted their appeal as haven assets and on concern that global demand will outstrip supply.

May-delivery corn on the Dalian Commodity Exchange gained 4 percent to 2,153 yuan ($323) a metric ton and closed at 2,149 yuan. Contracts in Chicago advanced to a two-year high after the dollar fell toward an eight-month low against the euro on speculation that Federal Reserve policy makers will signal this week their willingness to buy more government debt to support economic growth.

?Given the uncertain economic outlook in the U.S., there?s growing expectation that quantitative easing in the U.S. is on the way, therefore worsening the outlook of the U.S. dollar and boosting the appeal of commodities,? Yang Zhichang, analyst at Yide Futures Co., said in a report today.

U.S. employers cut payrolls by 95,000 workers in September after a revised 57,000 decrease in August, Labor Department figures in Washington showed on Oct. 8. The median forecast of 87 economists surveyed by Bloomberg News called for a 5,000 drop. The unemployment rate unexpectedly held at 9.6 percent.

Grains were also supported after the U.S. Department of Agriculture on Oct. 8 cut its corn-crop estimate for the second time in as many months, predicting a 3.4 percent decline from last year after flooding in June and hot, dry weather in August cut Midwest yields.

Corn gained as much as 8.5 percent to $5.7375 a bushel on the Chicago Board of Trade today, the highest level since September 2008.

Soybeans for May delivery surged by 4 percent to 4,276 yuan a ton and closed at 4,275 yuan. May-delivery rapeseed oil and palm oil also jumped by the daily limit of 5 percent in Dalian to 9,378 yuan a ton and 8,184 yuan, respectively.

?The latest U.S. Department of Agriculture report also showed a surprisingly low soybean inventory estimate in the U.S., leading to expectation that supply of the oilseed will get tight,? Huatai Changcheng Futures Co. said in a report today.

Gains in the agricultural commodities buoyed Chinese equities. Seed makers Gansu Dunhuang Seed Co. jumped 10 percent, the maximum allowed in one day, to 32.41 yuan a share in Shanghai, and Shandong Denghai Seeds Co. also advanced 10 percent to 76.89 yuan a share in Shenzhen.

Cotton for May delivery dvanced 9 percent to 25,390 yuan a ton on the Zhengzhou Commodity Exchange, the maximum allowed today.

China, the world?s largest cotton buyer, had booked to buy September booked to buy 595,000 tons of U.S. new-crop cotton, by the end of September Wanda said. ?The expectation is that China will have to import a lot more? to bridge a domestic supply shortfall, a factor that has supported cotton prices, it added

India Export Soybean Meal Increase 38 percent

Asia largest soybean exporter, India country, will jump 38 percent ?on export the soybean commodity to Vietnam and South Korea that have increasing of purchase of soybean import. Traders have signed contracts for 150,000 tons to 200,000 tons with buyers of soybean meal in Vietnam and South Korea for delivery in the quarter ending December. Soybean meal, mixed with poultry feed as a form of protein to aid birds? growth, has been sold at prices between $365 a ton and $378 a ton.

Soybean meal futures for December delivery rose as much as 0.7 percent to $295.8 a ton in electronic trading on the Chicago Board of Trade. Soybeans for October delivery on the National Commodity & Derivatives Exchange in Mumbai lost as much as 1.1 percent to 2,058 rupees ($44) per 100 kilograms.

Coordinator for the Soybean Processors Association of India has says that sales to Bangladesh, Pakistan and Sri Lanka, may jump to as much as 4 million metric tons in the year starting Oct. 1, the most since 2007-2008, from 2.9 million tons this season.

Soybean meal prices that have jumped 14.5 percent in the past six months in Chicago and increase competition for the U.S., Argentina and Brazil to supply China, Vietnam, Japan and South Korea, because pressure from India supplies.

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