(The author is a Reuters market analyst. The opinions expressed are his own.)
By Gavin Maguire
CHICAGO June 25 (Reuters) – The U.S. Census Bureau will publish statistics on May crop imports early next month and most traders will be watching for confirmation there was a record inflow of soybeans during that period.
Anecdotal evidence for May suggests that more than 350,000 tonnes of Brazilian soybeans were attracted to the United States by historically tight inventories and robust crushing margins.
But Brazilian soybeans are not the only oilseed imports that traders should be watching out for, as record amounts of Canadian canola have also made their way into the United States. The flow is expected to continue to northern U.S. crushers as long as processor margins remain firm and Canadian growers have excess supplies following a record crop last year.
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Statistics Canada figures show that from August to April, the most recent figures available, Canada has exported a record 765,299 tonnes of canola to the United States, more than double the 338,784 tonnes in the same period last year and up 63 percent from the previous five-year average of 469,020 tonnes.
The flow of canola is expected to generate record processor output of canola meal and oil, which are likely to steal market share from soy over the coming months.
Traders searching for insight into the U.S. soybean market should look beyond Brazilian imports because other oil crops such as canola look set to disrupt the oilseed market over the remainder of the 2013-14 crop year.
OVER-EXTENDED EXPORTS
The chief reason for the oilseed imports is that U.S.-based traders oversold the 2013-14 soybean crop to overseas buyers, leaving domestic consumers such as processors with tight inventories in the final months of the crop year.
And this comes after American growers produced one of the largest U.S. soy crops on record last year, which led to early expectations of a crop surplus going into the 2014-15 season.
Instead, domestic soybean crushers have been faced with an unprecedented shortage of soybeans for most of 2014 so far, and forced to ship in supplies from other countries in order to sustain processing operations.
The main conundrum for Midwest-based soy crushers is that, even after soybeans from Brazil or elsewhere arrive at a U.S. port, they have a long journey across the country or up river before processing can take place.
The problem is less acute for plants located in the upper Midwest or Northern Plains because rail or truck shipments from Canada are more readily available.
Furthermore, their proximity to widespread canola production means most Northern crushing plants have multi-seed processing capabilities that allow them to switch from soybeans to other crops whenever supplies or economics dictate.
This has certainly been the case with soybeans this year, so it is widely believed many northern U.S. crushing facilities have capitalized on canola imports. They have ramped up canola processing while cutting back on soy crushing to the maximum degree possible.
If that is the case, it raises the possibility that demand for soybeans in that region runs a greater risk of falling than in other parts of the country over the coming months.
BIG CROPS FIND A HOME
While robust crushing margins provided the demand for U.S. oilseed imports this year, abundant crops in Canada, Brazil and elsewhere provided the supply.
Last year’s Canadian canola crop was a record 18 million tonnes and helped push global rapeseed output above 70 million tonnes for the first time. Brazil’s 2013-14 soybean crop was the largest ever at 87.5 million tonnes, pushing the global total to just shy of 300 million tonnes.
Export projections for both crops were pushed up in the wake of such large harvests, but harsh weather coupled with heavy rail congestion on key lines across Canada and the northern United States slowed the flow of canola early in 2014.
That left the door open to South American soybeans to take a majority share of U.S.-bound oilseed shipments during the opening months of year.
But despite the rail problems Canadian canola exports to the U.S. set an unprecedented string of three plus-100,000 tonnes a month exports in February through April.
Only once before, in December 2011, had U.S.-bound canola exports topped 100,000 tonnes.
U.S. soybean imports also set a record during the period, but the tonnage of rapeseed imports was actually larger and the crop should be given due consideration by anyone hoping to understand the U.S. oilseed market going forward.
