Soybean reserves smallest in four decades after drought

Cargill Outlook

Meat consumption in China will continue to expand even as its economy slows, according to Cargill Inc., the biggest U.S. agricultural company. The “mega-trend” of rising demand applies across meat, milk and eggs, Christopher Langholz, the president of Cargill Animal Protein China, said in an interview in Singapore on Sept. 3. China’s gross domestic product rose 19- fold in the past two decades, the World Bank estimates.

U.S. sales of soybeans for delivery after Sept. 1 reached a record 18.08 million tons in the week ended Aug. 30, with China accounting for 65 percent of the cargoes, USDA data show. The U.S. may have to import 540,000 tons this year, the most ever, the agency estimates. That might increase further unless demand is choked off by higher prices, said Bill Gary, the president of Commodity Information Systems Inc. in Oklahoma City, which provides analysis and information to traders.

While the USDA has already cut its forecast for domestic consumption by 16 percent since June, FCStone expects stockpiles to drop by about 50 percent to less than 600 million bushels (16.3 million tons) by March 1 from a year earlier. The USDA estimated last month that the cost of soybeans at the farm would average a record $16 in the next 12 months, compared with $12.45 this season.

Soybean Meal

Sales of soybean meal for delivery after Oct. 1 rose 81 percent to 1.582 million tons on Aug. 30, compared with 699,684 a year earlier, USDA data show. U.S. processors in July crushed 137.4 million bushels of soybeans, the highest in five years, data from the National Oilseed Processors Association show.

Meal prices above $550 are “untenable” because they make feeding animals too expensive, Donald J. Smith, the president and chief executive officer of Tyson, told analysts on a conference call Aug. 6. The Springdale, Arkansas-based company will report net income of $600 million this year, down from $750 million in 2011, according to the mean of seven analyst estimates compiled by Bloomberg. Its shares have dropped 22 percent since the start of January.

JBS SA, the world’s largest beef producer, will raise prices in response to higher feed costs, Chief Executive Officer Wesley Batista told analysts on a conference call Aug. 15. Shares of the Sao Paulo-based company, which has 120,000 employees worldwide, have declined 7.9 percent this year.

Feedlot Losses

Feedlots lost about $316 a head in July fattening cattle for slaughter, said Ron Plain, a livestock economist at the University of Missouri. U.S. beef output will drop 3.9 percent to 24.575 billion pounds next year, the lowest since 2004, the USDA estimates. Retail prices will rise 5 percent, outpacing other food groups, according to the agency.

“Nobody has seen this kind of global shortage before, and yet there is little evidence that demand has slowed at current prices,” said Mark Schultz, the Minneapolis-based chief analyst at Northstar Commodity Investments Inc., which advises the grain, livestock and renewable fuel industries. “Soybean demand may not slow until we reach $20.”

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