The Hindu Business Line : Bumper soyabean crop in US likely to pull down prices

A MASSIVE increase in the forecast of US soyabean crop together with record world oilseeds output in 2004-05 is expected to put tremendous downward pressure on prices for oilseeds and oils, notwithstanding a lower opening world stock of oilseeds in the new season.

The latest World Agricultural Demand Supply Estimate released by the US Department of Agriculture (USDA) on October 12 places US soyabean crop at a new high of 84.56 million tonnes ( 3,107 million bushels of 17. 2 kg each), up 271 million bushels from last month based on record yield and higher harvested area.

In 2003-04, US soyabean output was down at 66.78 million tonnes (mt) because weather aberrations reduced yield to 38.5 bu/acre. The first forecast of 2004-05 crop made in June was 80 mt which was reduced to 78.2 mt in August and further down to 77.3 mt in September.

It was widely believed that in the October release the USDA would place the crop forecast higher because of favourable weather conditions. However, the extent of increase has taken many by surprise.

These numbers are sending shock waves across markets. No doubt, in the futures section, prices tended to be weak over the last few weeks because if improved crop expectation. But an unusual and indeed dramatic expansion of crop size - 7 mt in four weeks - is seen casting a shadow on the reliability of USDA numbers.

There is also a school of thought that believes the latest production numbers may have something to do with the impending US presidential elections.

As compared with last month and indeed last year, the US season-average soyabean price for 2004-05 is now projected lower at $4.70 to $5.50 per bushel. Similarly, soyameal prices are projected at $150-180 a tonne compared with $256 a tonne last year. Soya oil prices are also marked lower.

Aided by a large increase in US soybean crop, the USDA has pitched world production of major oilseeds at a record 385.9 m.t., an increase of 49.5 m.t. from last year's 336.32 m.t.

However, soyabean output in Brazil is forecast 1.5 m.t. lower from last month at 64.5 m.t. because of anticipated lower prices and lower planted area while the number for Argentina is unchanged at 39 m.t.

While the new season will open with a low stock of 43.30 mt oilseeds, world production of all major oilseeds (soyabean, rapeseed, cottonseed and groundnut) is expected to be higher in 2004-05.

Sunflowerseed crop would however be lower by about 1.2 mt following lower anticipated production in Argentina.

World vegetable oil production (major oils) for 2004-05 is estimated at 104.86 m.t. versus last year's 100.63 mt.

China's soyabean production is unchanged from last month at 17.5 mt , but up from last year's 15.4 mt.

China's soyabean imports are forecast to rise sharply to 22.5 mt, up from 16.9 mt in 2003-04.

While the global vegetable oil supply factors are known and prices are expected to reflect abundant availability, demand estimation is tricky. Overall improvement in global economic growth would encourage consumption, especially in the Asian region, but would be tempered by the current high rate of crude oil.