U.S. Soy Exports Face Uphill Battle Through August: Braun

(Reuters) – The United States has shipped a record volume of soybeans through the first half of the 2016/17 marketing year, but relative to the annual expectation, this year’s campaign is lagging those of years past.

Data from the U.S. Census Bureau on Tuesday showed that domestic soybean shipments totaled 4.42 million tonnes (162.3 million bushels) for the month of February, the lowest volume for the month since 2013.

In the first half of the current marketing year that began on Sept. 1, the United States – the world’s second-largest soybean supplier – exported 45.1 million tonnes (1.66 billion bushels) of the oilseed. This compares with 39.9 million for the same period in the previous year and 41.86 million in 2015 – the previous record holder for September through February shipments.

The record soybean exports thus far in 2016/17 mask the fact that the United States might actually be behind pace in its efforts. The huge numbers thus far could prevent USDA from considerably increasing its export target late in the season, a practice to which traders have become accustomed in recent years.

Based on the U.S. Department of Agriculture’s latest 2016/17 export projection of 55.1 million tonnes (2.025 billion bushels), total shipments in the first half of the year account for 82 percent of the total soybean volume expected to be processed by Aug. 31.

This fulfillment rate stands behind that of the previous four years relative to the actual shipments and annual expectations at the same point in time. The same rate last year was 87 percent, while it was closer to 91 percent in 2014 – and this is considering the springtime expectations for yearly exports, which is a moving target.

The 2016/17 shipment pace has also lost momentum relative to previous years. Through December, this year’s fulfillment pace stood on average about 2 percent behind the last four years, and that gap opened up to just under 4 percent at January’s end. Through February, the average deficit exceeded 5 percent.

Weekly port inspections – which can be used as a proxy to exports – imply that 2016/17 is even further behind years past. This year’s 85 percent annual fulfillment rate through March 30 is more than 7 percent below the average from the four years prior.

SECOND HALF FACES COMPETITION

The disparity in fulfillment rate might make sense given that the United States has never before had such a hefty export target. But at the same time, competitors Argentina and Brazil have never raised such a large soybean crop either, so 2016/17 U.S. exports will be under pressure from here on out.

If one assumes that USDA’s 55.1 million tonnes will be the final, realized exported quantity for 2016/17, the implied weekly shipment pace that the United States has to maintain in the second half of the marketing year has been met only twice before in the previous five years – 2012 and 2016.

On average, the United States needs to ship about 384,000 tonnes of soybeans each week between March 1 and Aug. 31 to reach the 55.1 million-tonne target given the volume that was shipped in the first half of the year.

In 2013 through 2015, that pace ranged from 177,000 to 318,000 tonnes, considerably lower than 2017’s needs. But in 2012 and 2016, weekly shipments in the second half of the marketing year averaged closer to 490,000 tonnes – proving that large volumes can be accommodated.

However, both of those years were associated with weather-related crop troubles in South America. In 2011/12, final soybean harvest volumes in Argentina and Brazil were 24 and 8 percent lower than initial expectations, respectively. In 2015/16, both crops ended up about 4 percent smaller than what the market had been expecting in April 2016.

The chances of a South American weather problem arising this year are eroding very quickly, as the Brazilian crop is expected to top last year’s harvest by at least 14 percent, and Argentina’s haul should at least equal – if not exceed – the one from 2015/16.

Since the March weekly shipment pace is typically more than twice that of August, whether the United States is meeting the 384,000 tonnes-per-week pace moving forward would be extremely difficult to measure. But simply comparing this figure against the averages actually observed in the past dictate that such large weekly volumes have rarely, if ever, been observed without a supply disruption in South America.

Brazil is in the later stages of its soybean harvest and its export season typically fires up in March and April and continues past August. And Argentina’s soybean harvest has just begun, so between the two countries, the United States will have a lot of competing soy and soy products coming onto the market as it heads into the final months of 2016/17.

USDA slightly lowered its view on 2016/17 U.S. soybean exports in its March supply and demand report and the agency will again have the chance to change that target when the April report is released next Tuesday at noon EDT (1600 GMT).

While there is no overwhelming sense among market participants that USDA is about to raise or lower its U.S. soybean export number, analysts are expecting to see a further swelling of the South American soybean crops in Tuesday’s report.