An Update on the Soybean and Soybean Oil Market

(IngredientNews) – Experts at a recent International Food Products webinar revealed the latest unanticipated changes in the soybean market. At the webinar (view here), Stratus Director of Risk Management Brian Owens analyzed the most recent findings behind the U.S.D.A.’s latest report.

Highlights from Brian Owens’ Report

Within the last 18 months, the soybean market has seen a low of 37 cents to a high that is off the charts.  May 9^th’s government supply and demand numbers showed that the 2013/2014 crop has an increase in 25 million bushels in imports from the previous month. Since the U.S. is more of an export country than an import country, this poses the question of whether or not our ports can handle this volume. The ports in concern are in New Orleans, Wilmington and Mobile.

Plans for crush for the remainder of this year have been raised by 10 million bushels over the previous month due to the U.S. crushing harder than most have expected. The U.S.D.A. has raised exports by 20 million bushels. This is somewhat of a head-scratcher since soybeans are flowing out of the country and as we try to keep them in the US and into our plants for production.

Carryover is down to 130 million bushels, which gives a low stocks-to-use ratio and brings to mind timing. Big questions arise such as will the new crop be late and will facilities run out of beans to crush? It’s still a little early but we can expect a large carryover next year with the size of this year’s soybean crop coming out of the U.S.

On the soybean oil balance sheet, production increased by 80 million lbs. due to the increased crush. Exports increased by 100 million with no changes being made to biodiesel or with food. Carryout was lower than 20 million lbs., relatively low compared to last year (15.5 million). Last year we also had a late soybean crop and with that basis increased, due to oil availability, out of place oil and logistics. We believe this is will be a potential issue. Imports hitting the US will help somewhat.

Recap

The biggest drivers with soybeans are planting progress and weather. Key market factors are expectation of reduced crush, lower Chinese demand/lack of credit and logistic issues.

Over the next 30-60 days, our expectation for the market is a range between 40-45 cents on the Chicago Board of Trade. It would take a major event to breakout of this range – ex: atypical weather or a demand shift such as the biodiesel fuel mandate.

At International Food Products, we think you should consider adding coverage at this time.