DECEMBER 8, 2003
SOYBEANS: IS USE DECLINING?
As everyone knows, the small U.S.
soybean crop of 2003 means that consumption of U.S. soybeans during
the 2003-04 marketing year will have to be significantly less than
during the 2002-03 marketing year. Year-ending stocks probably cannot
be reduced much below the current U.S. projection of 125 million
bushels. If that is the case, consumption of U.S. soybeans will
be limited to about 2.505 billion bushels this year. The actual
supply of soybeans may be somewhat different than the current forecast,
however, depending on the size of the final crop estimate in January
and on the magnitude of imports. At 2.505 billion bushels, use will
have to be 288 million bushels, or 10.3 percent, less than use during
the 2002-03 marketing year. The vigil for indications of a slow
down in use is under way.
The soybean market has focused on the export market for signs of
a slow down in consumption. The USDA has forecast a decline in exports
of 155 million bushels, or nearly 15 percent, from shipments of
a year ago. Export figures to date do not reflect any of the "rationing"
in consumption that is required. Shipments during the first quarter
of the 2003-04 marketing year are reported at about 350 million
bushels. That figure is consistent in the USDA weekly report of
export inspections and in the weekly report of export sales. Inspections
are nearly 7 percent larger than inspections reported at this time
last year. However, shipments are 15 percent larger than reported
in the Export Sales report last year. Whatever the correct figure,
exports are larger than those of a year ago. In addition, unshipped
sales as of November 27 were reported at 345 million bushels, 26
percent larger than unshipped sales on the same date last year.
The only sign of a slow down in export demand was the rather small
export sales of 9.4 million bushels reported for the most recent
reporting week ended November 27. The market discounted the small
sale, expecting China to resume purchasing later this month.
The USDA has forecast a 130 million bushel, or 8 percent, decline
in the domestic crush of soybeans during the current marketing year.
The Census Bureau reported the September 2003 crush at 127.6 million
bushels, 4.4 percent larger than the crush in September 2003. However,
the October 2003 crush of 144.9 million bushels was 3.1 percent
smaller than the crush of a year earlier. The crush during the final
10 months of the marketing year will have to be 9.8 percent smaller
than the crush of a year ago for the total to be at the USDA projection.
Based on Census Bureau estimates of soybean meal production and
month-ending stocks in October , apparent meal consumption during
October (the first month of the 2003-04 marketing year) was 3.4
percent less than during October 2002. Soybean oil consumption during
the month was down 4.3 percent. For the year, the USDA projects
a 7 percent decline in meal consumption (domestic plus exports)
and an 11.4 percent decline in oil consumption. Because the Census
Bureau estimate of stocks only reflect inventories at mills, calculations
of the rate of consumption based on only one month's data can be
misleading. However, it appears that some decline in meal and oil
use is underway.
Some argue that the decline in soybean oil consumption will have
to be even larger than projected because of the lower oil content
of the 2003 U.S. soybean crop. A lower oil yield was evident in
the October Census Bureau crush report. The average oil yield per
bushel of soybeans crushed in October was 11.12 pounds, 0.19 pounds
lower than the record yield of a year ago, and about 0.1 pound below
normal. With crush of 1.485 billion bushels, the lower than normal
oil yield would result in about 148.5 million pounds less oil production.
That is equivalent to about three days use.
One other troubling forecast by the USDA is the expectation of
a second consecutive year of very small "residual" or
unexplained use of soybeans. For the three years from 1999-2000
through 2001-2002, annual residual use was estimated at 74 to 79
million bushels, or about 2.7 percent of total use. Use dropped
to 42 million last year and is projected at only 39 million this
year, or 1.6 percent of total use. Quarterly stocks reports should
reveal if that forecast is on target and/or if there is an error
in the 2003 crop production estimate. If residual use exceeds the
forecast, fewer soybeans will be available for crush or export.
The soybean market looks to remain
very unsettled. While there is some evidence of a slow down in soybean
meal and oil use, soybean prices are likely to remain well supported
until more is known about additional Chinese purchases and the progress
of the South American crop. If Chinese purchases slow, as expected,
and the South American crop continues to make good progress, prices
may well move lower through the winter months. New highs may require
some problems with the South American crop.
Issued by Darrel
University of Illinois