COMMODITIES

Competitive Commodity Insights: Ho-hum! Another soybean shortage

Are we setting up for a soybean shortage?

The weather in South America this cropping season has been brutal, leading to what one commodities watcher called “massive reduction" in the continent's crop size for both corn and soybeans. Flooding contributed to both widespread declines in soybean production and shipping delays on what was produced in Argentina, even as drought in Brazil hurt production of both staple crops. South-American commodities expert Michael Cordonnierin, noting Brazil in mid-July was down to less than one week's supply, raised the possibility that country, the worlds second largest soybean producer, could actually run out of soybeans.

Meanwhile, with global demand, led by China, unabated, the tight supplies in the southern hemisphere could indirectly lead to a shortage here and around the world, as U.S. exports increase to fill the South American shortfall.

The world soybean supply is important to grocers because in addition to whole soybean food products and refined soybean oil products, like cookies, snack foods, cooking oils and margarine, soybeans are used in a wide variety of food, pharmaceutical and cosmetic products. They are also the second most common ingredient in U.S. animal feeds.

USDA reported in mid July the 2015-2016 U.S. export forecast is raised nearly 1 million tons, on top of last month’s 500,000-ton rise, currently standing at 48.9 million tons. In addition, the export forecast for 2016 and 2017 is raised to a record 52.3 million, 4 percent above the previous record set in 2014 and 2015.

South America is gobbling up all the soybeans

Those rocketing export levels will cut into the season-ending stockpiles of soybeans in this country, holding up prices above those observed in 2015. U.S. export bids in June averaged up $39 per ton from last month, at $444 per ton, the highest level in nearly 2 years.

However, it's important to note more than 66 million tons of soybeans in ending stocks are still available worldwide. That's down by 16 percent from 2014-2015's high of 78.4 million, but still higher than the low of 55.4 million in 2012-2013. So "shortage" may be premature. USDA's latest report on crop progress in this country shows the soybean crop in the states representing 95 percent of all production was 13 percent ahead of last year and 15 percent ahead of the 5-year average. Overall, 71 percent of the U.S. soybean crop was reported in good to excellent condition, unchanged from the week before but 15 percent above the same time last year.

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