Global oilseed prices are well supported by plunging stocks, which are the result of falling production and rising consumption.
The biggest decline was a 16.4 million drop in American soybean production as farmers shifted acres to corn last year. The biggest consumption increase was in China, where soybean imports rose 5.6 million tonnes to 35.26 million, according to U.S. Department of Agriculture figures.
The result is falling year-end global stocks, estimated at 53.24 million tonnes, down 25 percent and the smallest since 2003-04.
Brazil and Argentina were not able to make up for the decline in the United States. Argentina is expected to hold at last year’s 47 million tonnes of soybean production and Brazil is expected to climb only by 1.5 million to 60.5 million tonnes. But the weather has not been ideal, and the forecasts might be revised downward.
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Oilseed production must rise in 2008-09, but Oilworld in January forecast that despite increased production, year-end stocks were unlikely to increase.
The influential analyst from Hamburg, Germany, forecast that oilseed production is likely to increase by about 33 million tonnes.
However, total supply (carry-in plus production) would likely increase only about 10 million tonnes from 2007-08 because stocks carried into the year would be 23 million tonnes less than the year before.
Global annual consumption usually increases by more than 10 million tonnes so supply shortages are likely to emerge, keeping upward pressure on prices.
U.S. forecast
Oilworld and the USDA see U.S. soybean area rising by about seven million acres from the 63.6 million acres seeded last year, but Informa Economics sees it rising only about 5.3 million acres.
Volatile prices keep shifting the advantage between corn and soybeans in the U.S. Agronomic factors are also at play.
Farmers who seeded corn on corn stubble last year will want to move to soybeans to avoid disease and rebuild nitrogen in the soil. However, the supply of quality soybean seed is tight and that might limit the number of acres sown.
Because of their use in biofuel, oilseed prices are also affected by crude oil prices. There are worries that a slowing American economy will reduce demand, and crude oil is down about 10 percent from its $100 peak set in early January.
The supply situation has also improved a little because improved stability in Iraq has allowed it to rebuild oil exports close to prewar levels. However, OPEC has said it is ready to cut production if needed to maintain prices.
Also, oil demand is soaring within OPEC, thanks to highly subsidized domestic prices, offsetting forecasts of reduced use in the U.S. And prices remain subject to volatile movement, especially when there is unrest in the Middle East and Nigeria.
Canadian forecast
In Canada, analysts expect more canola acres, but how many more depend on competition from wheat, barley and pulse crops.
Agriculture Canada forecasts carryout stocks at 1.25 million tonnes, the lowest since 2003-04. It forecasts stocks will tighten further next year to 850,000 tonnes.
Domestic use has crept higher with improvements at existing crushing plants but should jump significantly, perhaps by as much as 2.84 million tonnes by 2010, based on the construction plans of Cargill, Louis Dreyfus, James Richardson International, Bunge and Archer Daniels Midland.
The move to trans fat-free food also increases demand for high oleic canola.
Agriculture Canada has made an early forecast of an annual average price at Vancouver of $465 to $505 per tonne for the new crop, versus $480 to $520 for the current crop year.
