Soybean Demand Strong
Although recent strength in soybean futures has been driven in great part by higher corn and wheat prices, strong soybean demand has also played a role in the price rally.
The latest evidence of strong demand came on Oct. 16 when the National Oilseed Processors Association (NOPA) reported that its members crushed 137.3 million bushels of soybeans during September, an increase of 2% from August and 8% over September 2005.
The NOPA crush number came in near the high end of trade expectations, which averaged 129-138 million bushels, according to a report from Reuters News Service.
The data suggests the total September crush reported by the U.S. Census Bureau later this month will be in the 143.5-144 million bushel range, compared with an August crush of 142 million bushels and a September 2005 crush of 133.2 million bushels. The strong crush data comes on the heels of several weeks of strong U.S. soybean export sales driven by active Chinese buying.
USDA reported soybean export sales of 39.9 million bushels for the week ended Oct. 5, which topped trade expectations of 25.5-33 million bushels. The previous week sales hit 43.9 million bushels, the highest weekly total recorded during September since 2003.
U.S. export sales for the 2006-07 marketing year to date are up 53.8% from a year ago and are 7.1% ahead where they were at the same point in the record export year of 2004-05. This is primarily due to China’s voracious appetite for soybean imports.
China has booked a total of 39.4 million bushels of U.S. soybeans over the past two weeks and its purchases for the marketing year to date have reached 173.4 million bushels, more than double the year-ago level.
For the 2006-07 marketing year, USDA sees China importing 32 million metric tons of soybeans (1.176 billion bushels), up 13.5% from 2005-06.
China’s 2005-06 imports were revised upward by 500,000 metric tons to 28.2 million tons from in the USDA supply/demand update released Oct. 12 after China’s August soybean imports exceeded 3 million metric tons.
The question in the soybean market now is whether demand is strong enough to keep prices headed higher in the face of record U.S. soybean supplies. The strong early demand pace has already raised overall expectations for 2006-07 usage to lofty levels and the futures market may already have largely factored in the strong demand at current price levels.
After increasing its export projection each of the past two months, USDA now projects 2006-07 soybean exports to hit 1.145 billion bushels, 4.3% above the record 1.097 billion bushels exported in 2004-05.
USDA also sees the crush rising to 1.780 billion bushels, up 2.1% from last year’s record high level of 1.739 billion bushels.
Editors note: Richard Brock, The Corn and Soybean Digest's > Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.
To see more market perspectives, visit Brock's Web site athttp://www.brockreport.com/brockreport.