U.S. soy supply at 48-year low as Brazil ships held

Record Crop

Harvests in March and April from Argentina and Brazil still are forecast to be the highest ever, with combined output jumping 28% from a year earlier, according to the USDA’s January estimate. Brazilian farmers probably will collect 82.7 million tons, the most ever, up from 66.5 million a year earlier, according to the average estimate in a Bloomberg survey of 23 analysts.

Since Jan. 28, the premium that exporters paid for U.S. soybeans delivered to New Orleans terminals is down 30%, a sign that overseas demand for U.S. supplies may be slowing, said Christopher Narayanan, the head of agricultural commodity research in New York at Societe Generale SA. Yesterday, the CBOT contract for March delivery was $1.515 more expensive than November futures, the highest premium since Dec. 17, which may slow demand for supplies left from last year’s crop, he said.

“Until we see an improvement in the export premiums, the market may move sideways,” Narayanan said. Chinese buyers waiting for North American harvests to arrive in September and October “raises the risks for subdued U.S. exports once South American crops begin hitting the market,” he said.

Rising Exports

U.S. exporters sold 34.22 million tons of soybeans as of Jan. 31, up from 26.86 million in the same period a year earlier, including a 13% jump in purchases by China to 20.86 million, government data show. Sales already are equal to 93% of the USDA’s forecast for the marketing year, with almost seven months left in the season that ends Aug. 31.

Sales of soybean meal reached 6.73 million tons in the first 18 weeks of the marketing year, up 43% from the same period in 2012, according to the USDA. The Philippines, the biggest buyer this year, increased purchases by 38% to 744,900 tons. Soybean-oil sales jumped to 759,000 tons from 222,000 a year earlier, with China buying 169,000, compared with none in the previous period.

China Pork

China has expanded imports of soybeans almost six-fold since 2000 as rising incomes and population boosted meat consumption, fueling more demand for crops to feed livestock. The country is the world’s largest pork consumer and will raise 690 million pigs this year, or 61% of the world total, according to USDA forecasts.

Demand has yet to slow for U.S. soybeans because of the supply risks in South America. Shipping and harvest delays in Brazil may force importers to buy more from the U.S., and an extension of Argentina’s drought may limit output to 47 million tons, or 13% less than the USDA’s forecast, Christina McGlone-Hahn, a Deutsche Bank AG analyst in New York, said in a Feb. 1 report.

“Either South America has to ship 12% more soybeans from March to August than they have ever done before, or prices have to rise to choke off Chinese demand for U.S. soybeans,” said Doug Jackson, a vice president at INTL FCStone Inc. in West Des Moines, Iowa, who has been a grain-industry analyst since 1974. “South America can have an infinite supply of soybeans, but if they can’t get them to the world market, it doesn’t matter.”

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