It’s a great time to be a soybean farmer and a pretty good time to be a canola grower.
Oilseed prices rose again last week after the United States Department of Agriculture shaved the American soy crop and increased export demand, resulting in the lowest year-end stocks figure since 1976-77.
But it appears soybean prices have not yet risen high enough to slow demand to levels needed to avoid running out of the crop.
The influential market newsletter Oil World says the supply-demand situation is tighter than most people realize.
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For example, USDA increased its Argentine crop estimate by one million tonnes to 38 million, but Argentine crop watchers are skeptical.
The USDA’s estimate is based on the same high yield as last year, but that was attained thanks to perfectly timed rains. This year drought plagued many areas and while recent rain has helped, some areas remain dry.
Also, although Brazilian farmers are now seeding soybeans on a record large acreage, problems are surfacing.
Asian soy rust, a crop disease not dangerous to humans but which can devastate yields if not treated, has already appeared in germinating crops. The disease blew into Brazil for the first time in 2001.
Last year, Brazil produced a record soybean crop of 52 million tonnes, but it would have been about three million tonnes larger if not for Asian soybean rust.
There are fungicides available and crop input retailers have good supplies but it remains to be seen how well Brazilian farmers can keep the disease at bay.
The USDA’s foreign agriculture service has done a good analysis of the disease and its impact on Brazil’s soy crop. It can be accessed by going to www.producer.com and clicking on links in the news.
Included in the analysis is an explanation of how the fungus has spread around the world. It has yet to reach North America.
Although canola this year is not suffering from the same supply shortage as soybeans, it is riding the soy rally’s coattails. Every time soybean oil prices rise, the price of canola oil can also edge up, although the rising loonie is muting the effect as will the soon-to-arrive Australian harvest.
A final factor supporting oilseed prices is the tight supply of Malaysian palm oil, now at a four-year low.
