Analyst sounds alarm over soybean carryout estimate

USDA accused of overestimating soymeal demand in China, which when eventually corrected could lower oilseed prices

Soybeans and related oilseeds could eventually be in for a big downward price adjustment because of an accounting error, says an industry analyst.

Arlan Suderman, chief commodities economist with INTL FCStone, believes the U.S. Department of Agriculture’s world ending stocks estimate for the crop is way too low.

The USDA is forecasting 95 million tonnes of carryout in 2019-20, but he thinks the number should be closer to 109 million tonnes.

Based on conversations he has had with colleagues and customers on the ground in the world’s biggest soybean market, Suderman believes the USDA has grossly overstated soymeal demand in China.

That is resulting in understated 2018-19 Chinese ending stocks, and the USDA continues to overestimate soymeal use in that country in 2019-20, he said.

A correction will have to be made at some point, which will have a profound effect on soybean prices and subsequently on canola prices, which are closely tied to soybean values.

“I think it takes a significant amount of money off prices. I wouldn’t be surprised by a $1 (per bushel) selloff if they do it,” he said during a webcast following the release of the USDA’s Nov. 8 World Agricultural Supply and Demand Estimates report.

It wouldn’t be the first time the USDA has made a seismic correction to its China ending stocks estimates.

One year ago the department suddenly increased its 2018-19 Chinese corn ending stocks in the Nov. 8, 2018, WASDE report to 207 million tonnes from its October estimate of 59 million tonnes.

The USDA said the adjustment was made because of an “unprecedented” 266 million tonne increase in corn production between 2007-08 and 2017-18 made by China’s National Bureau of Statistics.

Suderman said the anticipated adjustment to soybean ending stocks could happen in next month’s report or it could take years. He doesn’t expect it to occur soon but anything is possible.

“It could happen at any time. It could happen next month, so it’s a risk that producers need to respect,” he said.

“But the odds are the USDA will be slow in correcting that, so I’ll be an outlier for a while.”

Suderman admits to being a bit of a lone wolf regarding his discrepancy with the USDA on world soybean ending stocks.

Pre-WASDE report forecasts by other analysts ranged from 88 to 94 million tonnes.

“It does make us stand out,” said Suderman.

“It makes us look like we don’t know what we’re doing, where in reality we do know what we’re doing.”

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