Large South American production and signs of weakness in Chinese demand may prevent soybean prices from moving higher this spring despite concerns about tight U.S. soybean stocks and lower U.S. planting intentions.
Although U.S. soybean stocks remain tight, world soybean stocks are far from tight.
With USDA raising its production estimates for Brazil and Paraguay on Friday, the agency now forecasts 2010-2011 total South American soybean production at 132.8 million metric tons (mmt), down only 1.4 mmt from last year’s record level.
World soybean production is seen at nearly 261 mmt, up from last year’s 260.2 mmt and is expected to exceed usage by about 2.1 mmt, pushing world ending stocks to a record 60.94 mmt.
World stocks could wind up even larger due to government price controls that have hurt crushing margins in China.
An official at COFCO, China’s large state-run grain trading company, said on Monday that she expects cancellations or deferrals of soybean cargos by Chinese buyers due to poor crush margins.
COFCO has revised its estimate of China's 2010-2011 soybean imports to 53-54 mmt from an earlier estimate of 54.5-54.8 mmt, Liu Ni, manager with COFCO's oils and oilseed information department, told a conference in Beijing.
Liu attributed the downward revision in part to negative crushing margins coupled with regular sales of state reserves as part of government efforts to tame food inflation.
The extension of government controls on cooking oil prices is expected to keep Chinese crush margins under pressure.
The controls have helped contain domestic prices of soy oil while costs for soybean imports have jumped more than 10% since Beijing instituted the price caps in December.
USDA currently estimates China’s 2010-2011 soybean imports at 57 mmt, up 13.2% from 2009-2010 imports of 50.34 mmt.
Official Chinese customs data indicates China’s imported 3.51 mmt of soybeans in March, 12% less than a year earlier. January-March soybean imports of 10.69 million tons were 0.7% behind a year earlier.
Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.