Record Global Soybean Stocks04/18/2017
The U.S. Department of Agriculture already pressured the soybean complex with a larger-than-expected increase in soybean planted area expectations and quarterly stock levels. Those reports were followed up by a bearish World Agricultural Supply and Demand Estimates report that showed an increase in U.S. ending stocks of soybeans for the current crop year, as well as swelling its estimate for global soybean supplies to a record 87.4 million tons.
But why does this matter? This huge stock level with an expected increase in U.S. planted area of 6.1 million hectares (from last year) point towards ongoing pressure for all oils. It also means that much of the bearish news is likely known. A major rally is not likely given burdensome supplies, but the market cannot fall much lower.
The USDA reported in its weekly release that winter wheat crop conditions have improved. The crop is rated 53 percent good/excellent compared to 51 percent last week and 56 percent a year ago. Spring wheat planting kicked off in the U.S. as well, with the USDA showing 5 percent complete compared to the five year average pace of 11 percent. In the WASDE report, the market had to contend with higher stock levels (again). The USDA cut feed and residual usage to reflect higher quarterly stock figures, leading to ending stocks increasing 30 million bushels (to 1.159 billion bushels). The market continues to trend sideways as weather conditions have improved in the U.S. for the winter wheat crop. Plenty of rain is good for the early spring development.
The durum market has held steady at low prices. The USDA cut ending stocks modestly for durum in the U.S., but large supplies continue to weigh on the market. Beyond these high stock levels, the burdensome wheat market is keeping a lid on durum, as well.
The canola market remains the firmest of the major oils, but pressure from palm and soybean oils are keeping prices in check. Canola usage remains quite high, and demand for crush is surging. After the fall rains that kept farmers from harvesting roughly 20 percent of the crop for more than a month, supplies are not too large. Yet the overwhelming supply of soybeans in both the U.S. and South America is keeping the canola market from turning significantly higher. Adding to pressure was the palm oil market’s drop following Malaysian data reflecting growing stock levels. In the spring, look for canola to separate itself from the broader oils markets, as weather will become a more dominant factor. Until then, look for pressure to continue.
Peas & Lentils
International pulse markets have been on the defensive in the last week, as Argentine exporters are looking to increase sales. This has pressured both lentils and peas coming out of the U.S. and Canada.
There has been little excitement for the mustard seed market in recent weeks. The Canadian Grains Commission reported just 500 metric tons of bulk mustard seed cleared through reporting terminals in the last week. Total exports to date for the current crop year are 13.4 thousand metric tons compared to 13.1 thousand metric tons last year at this time.
Barley planting is under way in the U.S. The USDA showed nine percent complete which is lagging the five year average pace of 16 percent. In the monthly WASDE report, the USDA modestly increased usage for feed, taking ending stocks of the grain down to 98 million bushels.
Source: Alex Norton, Agweek