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Fading U.S. soybean exports threaten to expand stockpiles

Given the recent, historically thin exports, it might take some extraordinary circumstances for U.S. soybean shipments to approach the government’s full-year target. And without an extended turnaround in export demand, U.S. soybean stockpiles could swell to the second-highest levels on record by September, despite last year’s short crop.

China is likely the only country that could provide the needed lift to U.S. soybeans, but given cheaper, abundant supplies in Brazil and a slower global economy in the wake of the coronavirus, the outlook is not too favorable. The recent Phase 1 trade deal suggests China must buy significantly more U.S. soybeans than it has, but market conditions, not goodwill, would probably govern such a move.

The United States exported just 2.76 million tonnes of soybeans in February, the fewest for the month since 2004, according to data published on Thursday by the U.S. Census Bureau.

Very few American soybeans were shipped in February to top buyer China, which has agreed to import a record value of U.S. farm goods this year under the Phase 1 trade deal. Soy exports to China in February totaled 471,761 tonnes, down 78% on the year and the lightest for the month since 2000.

The latest data brings U.S. soybean exports in the first half of 2019-20, which began on Sept. 1, to 30.5 million tonnes. That is up 13% from the previous year’s lull but down 25% from the 2014-2018 average.

March might have been even worse for U.S. soybeans. Export inspection data published on Monday by the U.S. Department of Agriculture combined with recent trends in actual shipments put the March volume right around 2 million tonnes, but it may have fallen short of that.

That would be the worst March since 1.96 million tonnes in 2013, but if shipments fall below that number, they will be the smallest for the month since 2002.

Inspection data also implies that fewer than 200,000 tonnes of U.S. soybeans sailed to China in March, and that is the lightest for the month since 2002. Combining February and estimated March exports to China would put that volume at the smallest since 1999.

USDA’s latest 2019-20 target for domestic soybean exports is 49.67 million tonnes or 1.825 billion bushels. Based on first half numbers and estimates for March, that would require April-August exports near 17 million tonnes, conservatively. That would be a record for the period.

Export sales are critically behind the pace required to achieve this record, even with stronger numbers in the latest two weeks. Using USDA’s weekly export sales through March 26, the United States is close to 13 million tonnes short on sales to meet USDA’s full-year export target.

Comparing that volume with actual sales from the same week through the end of August in previous years demonstrates just how big this feat would be. Over the last five years, sales between the end of March and August averaged about 5.6 million tonnes with a high of 8.4 million in 2016.

That higher number in 2016 was partially driven by larger than usual sales to China after Brazil’s crop fell short due to drought. Typically, U.S. soybean sales in the final five months of the marketing year are predominantly to other buyers.

But those non-China sales during the end of the marketing year have never been enough to make up the 2020 deficit in discussion. The most extreme example was in 2018, when non-Chinese buyers snatched up 8.2 million tonnes of old-crop U.S. soybeans between April and August as the trade war sent U.S. bean prices on a historic plunge against their Brazilian competition.

Non-China U.S. soy exports through the first half of 2019-20 were down from last year’s anomaly but second-highest ever and up 31% from two years ago. That suggests that exceedingly high purchases from other buyers are less likely in the coming months, especially given the virus-fueled economic slowdown.

Goodwill purchases from China might be the only option left to achieve anything close to USDA’s export outlook. China has not made goodwill U.S. bean purchases since before the Phase 1 deal was signed back in January. And although under the gun for huge U.S. imports per the deal, Beijing plans to buy based on need and market condition, not supportive of unexpectedly large goodwill sales.

USDA will have a chance to adjust its export number when it publishes its monthly supply and demand outlook on Thursday. The agency pegs U.S. ending stocks at 425 million bushels, down from last year’s high of 909 million.

But aside from last year’s outlier, the previous carryout record was 574 million bushels in 2006-07, a mark that is surmountable in 2019-20 without a jolt to demand.

Brazil is nearly finished harvesting what is expected to be a record soybean crop, and its recent exports have been nothing short of impressive. Not only are Brazilian beans cheaper than U.S. ones, but farmers have been eager sellers with a record weak currency.

Brazil exported a massive 11.6 million tonnes of soybeans in March, some 30% more than 2017’s record for the month. That is more than the all-time monthly U.S. record of 11.2 million tonnes set in October 2016. For Brazil, that is second only to May 2018’s 12.35 million tonnes.

Between September and March, the first seven months of the U.S. marketing year, Brazil exported a record 35.8 million tonnes of soybeans, up 4% from the previous year’s high. Some 81% of those went to China, and although the actual volume is down about 3% from last year, it is up 46% from two years ago, which was record at the time.

USDA pegs Brazil’s soybean harvest at 126 million tonnes, but industry analysts have recently reduced estimates based on drought, some as low as 120 million tonnes. If Brazil’s crop comes up short, this could give a bump to U.S. soybean sales in the next couple of months, as in 2016.

But global soy stocks were a little tighter four years ago than today, and the increased U.S. sales would still likely fall short of what is needed. For reference, USDA had estimated Brazil’s 2015-16 soybean crop as high as 100 million tonnes, but final production fell to 96.5 million, less than 1% off the previous year’s record.
Source: Reuters (Editing by Matthew Lewis)

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