Archives for August 2012

MaxYield grain analyst Karl Setzer weighs in on soybean demand issues, in this article appearing in the Wall Street Journal…

By SAMEER C. MOHINDRU, Wall Street Journal

PHUKET, Thailand—A Taiwan importers’ association bought soybeans Tuesday, in what might seem a routine tender. But it wasn’t.

Instead of buying one cargo of around 60,000 metric tons, as usual, the Taichung-branch of Taiwan’s Breakfast Soybean Procurement Association bought three, including one not due for shipping until next July. It was the second time in less than a week that a Taiwanese buyer had taken above-average or far-forward amounts.

As prices for soybeans, like these growing in Oakland City, Indiana, rise, the growing order volume is sparking worries about the global supply of the beans, which feed both people and animals.

With prices already in uncharted territory and an even tighter market in the future seeming all but inevitable, soybean importers elsewhere having been locking in supplies, too.

Prices for wheat and corn are also soaring as dry weather in regions from Latin America to North America, Russia and Australia eat into harvests. But the time bomb ticking under the global soybean trade is potentially more explosive. Corn and wheat can be substituted for one another for many uses—but soymeal substitutes are limited, and even costlier. The high-protein meal, which is what remains after the oil is extracted from the beans, is used in animal feed.

Worries about soybean supplies started with drought in several parts of South America earlier this year. The U.S. and South American countries account for more than 93% of the global soybean trade.At the time there were hopes that the resulting shortfall would be made up by a good crop in the U.S., said Abdolreza Abbassian, Rome-based secretary of the Food and Agriculture Organization’s Intergovernmental Group on Foodgrains.

But instead dry weather has hit the U.S., too, and the 2012 crop is wilting in the fields. Last week, the London-based International Grains Council cut its forecast for global soybeans output for the 12 months starting Oct. 1 by 3.8 million tons, or 1.5%, and that’s assuming a rebound in South American production next spring.

The U.S., the world’s top soybean producer and exporter, may almost run out by the time next year’s crop is harvested in the autumn of 2013.

“Technically the soybeans inventories may not fall to absolute zero because there are always at least some soybeans somewhere, but still by the time the 2013 harvest arrives a year from now the trade pipeline will be empty and the U.S. will be importing more soybeans than usual,” said Roy Bardole, chairman of the U.S. Soybean Export Council.

This year’s U.S. crop is being snapped up fast, with about 55% already sold for export, a record for this time of the year. By the time the harvest is over, the entire crop is expected to be have been sold for forward shipments, said Karl Setzer, an Iowa-based analyst with MaxYield Cooperative.

Reduced availability and higher prices are spurring importers to buy more, not less, as a hedge against even higher prices in the future. China, which accounts for more than 60% of the world’s soybean imports, is also buying cargoes several months before shipment. Demand there is driven mainly by double-digit annual growth in dairy-product consumption, 5% to 6% growth in poultry consumption and 3% growth in pork consumpion, said Christopher Langholz, the business unit leader at Cargill Investments (China) Ltd.’s animal protein division in Shanghai.

Demand is rising in Southeast Asia, too. John Lindblom, the U.S. Soybean Export Council’s director for the region, says U.S. soybean exports there could rise by 12% next year despite the drought, particularly due to creation of fresh crushing capacity in Vietnam.

“Soybeans can and will likely top $20 a bushel,” said Iowa analyst Mr. Setzer. “I wouldn’t rule out $25 on spot soybeans by spring, maybe even higher” Near-month futures on the Chicago Board of Trade hit a record $17.7775/bushel last month. They finished Tuesday at $17.4525.

High prices could encourage growers in South America this fall. The area planted to soybeans could grow by 4.3 million hectares, or almost 9%, Thomas Mielke, executive director of the Hamburg-based journal Oil World Global Research and Analysis, projected.

But the FAO’s Mr. Abbassian cautioned that increased soybean planting isn’t a certainty, pointing out that near-record prices for corn are providing an incentive of their own.

The Chicago Board of Trade will observe the following hours in observance of the Labor Day holiday:

Friday, August 31^st           Regular Close

Sunday, Sept 2^nd               No Trade

Monday, Sept 3^rd                    No Day Trade

7:00pm Open Night Trade

MaxYield Cooperative is pleased to announce that we have extended our grain origination agreement with Green Plains Renewable Energy at Lakota, IA for an additional three years, effective November 1st.

With the extension, MaxYield Cooperative will continue to provide grain origination services at the Lakota ethanol production facility through at least October 31, 2015.

MaxYield looks forward to providing grain marketing solutions that are mutually beneficial for area farmers and Green Plains Renewable Energy at Lakota.

More information about MaxYield Cooperative can be found at www.MaxYieldCooperative.com.

Information regarding grain marketing opportunities at GPRE at Lakota, can be found online at www.MaxYieldGrain.com.