As events go, the July 11 World Agricultural Supply and Demand Estimates was a non-event.
In what has become a volatile market, with limit moves based on the smallest morsel of news, the estimates from the U.S. Department of Agriculture barely budged prices.
“Friday’s report came out as close to expectations as any report ever has,” said Ken Ball, a broker with Union Securities in Winnipeg.
But the report confirmed what the trade already knew, that the world oilseed situation is very tight.
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Heavy June rains and the subsequent flooding of cropland in Iowa and other Midwest states prompted the USDA to lower U.S. soybean production by 3.4 percent. The 2008 crop is forecast at three billion bushels, down 105 million bu. from last month’s estimates.
As a result, ending soybean stocks for 2008-09 were estimated at 140 million bu., a drop of 35 million bu. from the June forecast.
Most importantly, the USDA raised soybean average price estimates to $12 to $13.50 per bu., up $1 per bu. from its June report.
“The markets can’t totally relax, there just isn’t enough room for error,” said Ball, referring to the nervous state of traders, given the tight soybean situation.
The downgrade of U.S. soybean numbers should be partially offset by gains in canola production. Agriculture Canada forecasts canola output at a record 10.1 million tonnes, up 700,000 from its May forecast based on acreage gains in Western Canada.
Despite the expected production, growers shouldn’t worry that an abundance of canola will weaken prices because the soy complex remains vigorous, said Charlie Pearson, crop analyst for Alberta Agriculture.
“Canola, all the way along here, has been trading along with soybean oil,” said Pearson, commenting on canola trading in the $600 to $700 per tonne range over the last four months, while bean oil traded between 55 and 65 cents per pound.
“You could almost set the two of them right on top of the other.”
Another factor supporting canola is that demand should be strong enough to handle even a record crop.
“I don’t think we’re going to have any trouble selling whatever we have,” Pearson said, citing the usual buying from Japan and Mexico, along with new demand from domestic crushers when new plants open in Yorkton, Sask.
As well, worldwide demand for all oilseeds remains strong, even with the high prices.
“The difference between beans and corn is that corn demand is fading noticeably, where the bean demand has stayed pretty firm,” Ball said July 14, as corn prices continued to sag.
Since topping $8 per bu. in early July, good growing weather in the Midwest had pushed corn futures down to the $6.70 range for nearby contract months.
Mike Palmerino, forecaster with DTN Meteorlogix, told Reuters News Agency that the ideal weather conditions might remain for a while.
“I can’t find any problems with this pattern, which is projected to continue for the next week to 10 days,” he said.
