World Grain - June 2009 - 20

GRAINMARKETREVIEW
Cash soybean prices

Oilseeds
Recent soybean rally may be
short-lived as USDA projects
near-record production for U.S.,
Argentina in 2009-10

May*

Mar

Jan-09

Nov

Sep

Jul-08

May

Mar

Jan-08

Nov

Sep

* Mid-month price
Prices received by U.S. farmers
Source: U.S. Department of Agriculture

U.S. soybean supply situation
(Ending stocks versus use)

2008-09*

2004-05

2000-01

1996-97

1992-93

1988-89

1984-85

50
45
40
35
30
25
20
15
10
5
0

1980-81

20

May

Global soybean prices have rallied sharply over the past two
months, as thin 2008-09 supplies and strong demand from China
have more than offset continuing concerns about the world economic slowdown. But according to the U.S. Department of Agriculture
(USDA) and some analysts, the recent price strength is unlikely to
persist into the 2009-10 season.
After reaching record highs of nearly $500 a tonne in mid-2008,
soybean prices plunged by more than 30% amid the global credit
crisis and a sharp contraction in economic growth. But prices as of
mid-May had advanced by 25% from the December lows to push
above $400 a tonne for the first time since August 2008.
As 2009 progressed, crop prospects in Argentina, plagued with a
historic drought, continued to deteriorate. Late-sown soybeans failed
to receive even half of the usual March-April rainfall, the USDA said,
leading the agency to cut its estimated 2008-09 Argentine production
to 34 million tonnes, down 26% from the previous season.
Meanwhile, soybean imports from China in the period October
2008-March 2009 surged by 12% from the same period in the previous year. That buying lifted the USDA's estimate of 2008-09 Chinese
imports to 37.5 million tonnes, just below the record 37.8 million set
in 2007-08.
China's buying reflected worries about new-crop availabilities
in South America as well as policies to support internal prices by
allowing the state reserve to buy domestic output. That program
prompted soybean processors to import cheaper foreign soybeans
at a record pace.
The Chinese purchases included larger-than-expected sourcing
from the United States, prompting the USDA to raise the 2008-09
U.S. export estimate to a record 33.75 million tonnes and leading to
a drop in U.S. ending stocks estimates. In its May report, the USDA
cut U.S. ending stocks to 3.53 million tonnes, representing a 7.2%
stocks-to-use ratio, second lowest on record behind the 6.9% ratio at
the end of 2003-04.
But the 2009-10 outlook portends a turnaround, based on USDA's recent projections for the upcoming season. On the supply
side, production in both Argentina and the U.S. is expected to jump
to record or near-record levels, while the growth in import demand
from China should be tempered by the country's accumulating domestic reserve stocks.
The USDA projected 2009-10 Argentine soybean production at a
record 51 million tonnes, based on record harvested area and a 40%
jump in average yield with normal climatic conditions. The USDA
noted that if the Argentine drought lingered into mid-June, winter
wheat plantings could drop to a 40-year low, making more area available for soybeans.

Jul-07

by Melissa Alexander

(in U.S. dollars per tonne)

525
500
475
450
425
400
375
350
325
300
275
250
225
200

*Estimated
Source: U.S. Department of Agriculture

In the U.S., cool, wet weather has greatly slowed planting progress
for maize, which by May 10 was 48% planted versus the five-year
average of 71%. In the Northern Plains, sowing of spring wheat also
was lagging, at 35% versus the 78% average.
The grain planting delays could encourage a switch to soybeans,
which would lift soybean area above the 30.4 million hectares estimated by the USDA in March. Given normal yields, the 2009-10
supply situation should be eased considerably, with the USDA projecting a near-record crop of 87 million tonnes and a 77% increase in
ending stocks to 6.26 million tonnes.
Some analysts say U.S. soybean area could increase even more, not
only because of grain-planting delays but because producers can lock
in attractive returns at current price levels. With normal yields, one
analyst said ending stocks could rise to 8.7 million tonnes.
The USDA said 2009-10 season-average prices could drop to as
low as $310 a tonne, which would return prices to 2007 levels, while
the high end of the USDA's projected 2009-10 range is $384. That
compares with the expected 2008-09 average of $362 and the midMay price of around $410.
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June 2009 / World Grain / www.World-Grain.com
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World Grain - June 2009

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