World Grain - September 2015 - 22

GRAINMARKET REVIEW

Oilseeds
Stronger dollar weighs on
soybean prices

Global soybean ending stocks
(in 1,000 tonnes)

100,000
80,000
60,000
40,000

by Chris Lyddon
20,000

*Projected ** Estimated

2015-16**

2014-15*

2013-14

2012-13

2011-12

2010-11

2009-10

0
2008-09

Currency factors have proven bearish in soybean markets in recent
weeks, helping exporters outside the U.S. South America has been
breaking records with shipments to China. Longer term, reduced
rapeseed crops are set to cut international trade volumes.
In its Grain Market Report at the end of July, the International
Grains Council (IGC) said "the IGC GOI soybean sub-Index was little changed over the month as pressure from ample global availabilities, improved U.S. Midwest weather and, at times, outside markets,
ZHUHPRVWO\RIIVHWE\VXSSRUWIURP¿UPHULQWHUQDWLRQDOGHPDQGQRtably for South American supplies."
In two-sided trade, U.S. soybean futures settled narrowly mixed, with
new crop contracts fractionally weaker, it said. "Initial support stemmed
from smaller than expected June 1 stocks data and worries about the impact of excessive moisture on Midwest yield potential. However, gains
were later reversed by drier weather in the most saturated areas.
³2XWVLGHLQÀXHQFHV±LQFOXGLQJD¿UPHU86GROODUDQGZHDNHU
PDUNHWV IRU HQHUJ\ DQG YHJHWDEOH RLOV ± DOVR ZHLJKHG DV GLG FRQcerns about potentially reduced demand from China against the
backdrop of slower economic growth. Reports of U.S. imports of soy
meal from South American origins also mildly pressured."
Physical markets in South America were mixed, as underpinning
from robust export demand was countered by pressure from losses in
U.S. futures and an uptick in the pace of farmer sales, it said.
,WUHSRUWHG,&(FDQRODIXWXUHVXSE\³,QLWLDOVXSSRUW±WLHGWR
worries about prolonged dryness in parts of Alberta and SaskatchHZDQ±ZDVRXWZHLJKHGE\SUHVVXUHIURPZHDNQHVVLQVR\EHDQVDQG
EHQH¿FLDOSUHFLSLWDWLRQDFURVVSDUWVRIWKH3UDLULHVLQWKHVHFRQGKDOI
of July," it said. "However, losses were limited by ideas that damage
from dry weather was irreversible in some areas."
The USDA Economic Research Service's Oil Crops Outlook also
noted the effects of the dollar value, identifying it as a factor enhancing Brazil's competitiveness. "Brazil's exchange rate lost 8% of its
value against the U.S. dollar in July alone and 32% since January,"
it said. "Until Brazil shores up the credit rating of its government
bonds, depreciation may continue. Under such circumstances, the
value of soybean sales in the country could strengthen even more
this year.
"Soybean imports by China are largely responsible for this summer's surge of exports by Brazil and Argentina," ERS continued.
"China's July soybean imports - at 9.5 million tonnes - were an
all-time high and imports from South America for August could be
almost as large."
Improving margins for hog production in the country have encouraged a higher volume of protein meal consumption, it said. "Not all
of the soybean supplies might be used right away, so 2014-15 car-

Source: U.S. Department of Agriculture

ryout stocks could be above last year's level," it said.
Again, currency plays a part. "China's central bank in August allowed a 2% devaluation of the exchange rate," ERS said. "This deYHORSPHQWPD\LQGH¿QLWHO\FXUWDLOQHZ86SXUFKDVHVDVLWZLOOFXUE
crush margins for imported soybeans."
It also predicted that E.U. import demand for soybeans may also
be more pronounced in 2015-16 with reduced domestic supplies of
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"A higher soybean crush may not, however, fully replace the lower
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YHJHWDEOHRLOGH¿FLWZRXOGPRVWOLNHO\EHVXSSOHPHQWHGE\LPSRUWV
of palm oil. At Rotterdam, crude palm oil is currently at its widest
price discount versus rapeseed oil in two years."
The ERS is predicting a big fall in rapeseed stocks, because of
smaller crops in Canada and the E.U. The USDA has cut its forecast
for global 2015-16 rapeseed production by 2.6 million tonnes to 64.6
PLOOLRQ7KH ¿JXUH LQFOXGHV D WRQQH FXW LQ WKH (8¶V FURS
to 21.1 million, on the basis of lower yields in the United Kingdom,
Czech Republic and Romania. With supplies down in major exporters
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Australia's 2015-16 canola crop is also forecast 300,000 tonnes
lower than previously, at 3.3 million tonnes. "Rainfall has been mostly favorable so far this season, but canola production may decline on
account of a lower estimate of sown area," it said. "This year, better
expected returns encouraged farmers to expand barley, wheat, and
oats area."
The smaller harvest will limit Australia's capacity to take advantage of the opportunity for more exports to Europe.
It's not just Europe. "Like other importing countries, rapeseed imports by China will be rationed by the supply shortfalls of its major
trading partners," ERS said.
Chris Lyddon is World Grain's European correspondent.
He may be contacted at: chris.lyddon@ntlworld.com.
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World Grain - September 2015

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