The outbreaks of mad cow disease and hoof and mouth disease in Europe have analysts here wondering, “Is this bearish news or bullish news for U.S. soybeans?”
“It was hoped a few months ago that taking the bone meal out of the European feed ration to address the mad cow disease problem would be quite beneficial to our export meal into Europe,” said grain analyst Greg Grow at a recent Chicago Board of Trade press briefing.
“But in the long term, if the disease problems get bigger, historically that leads to liquidation of livestock numbers. Fundamentally, that would not be strong for the feed structure there and our ability to export soybean meal.”
Currently, U.S. soybean exports remain strong, despite a South American crop that continues to get bigger. USDA increased its estimate of Argentina's production by 1 million tons in its March 8 supply/demand report.
This was a bit of a surprise to the trade, which had asserted that USDA overestimated the Argentine crop last month. “I think good growing conditions there factored into USDA's thinking,” said Grow.
The large South American soybean crop will inevitably cause some weakness in the market as the South American harvest begins, according to the analyst.
Part of the reason for the recent surge in soybean exports comes from China. USDA raised its estimate of China's soybean imports to 9.3 million tons, up 700,000 tons. “The export pace on soybeans is very demand driven,” said grain analyst Don Roose. “The Chinese have been very aggressive on their purchases. The big question is, ‘Do they slow down on those purchases.’”
USDA raised its estimate of U.S. soybean exports by 15 million bushels over last month, resulting in a reduction in ending stocks to 330 million bushels. That's down from last month's 334 million bushels and up from last year's 290 million bushels.
USDA estimated corn ending stocks at 1.941 billion bushels, up from last month's estimate of 1.891 billion bushels and up from last year's 1.718 billion bushels. The higher ending stocks were due to lower export numbers and were at the low end of trade expectations. Some analysts believe USDA could lower exports estimates and raise corn ending stocks estimates again next month.
“Exports could trend 9 to 10 percent below last year's pace,” Grow said.
A lot depends on how Japan and the United States deal with the Star Link issue, according to Grow. “The positive on that is that we could have a strong demand market the latter half of the year, depending on how that situation is resolved. Japan has been a hand-to-mouth buyer because of the situation.”
The analyst added that the important thing to watch for this spring is how many corn acres the United States plants. High input costs have driven up projected costs by $50 to $75 an acre and could result in the loss of significant acreage.
USDA projected ending stocks for wheat at 834 million bushels, down from last month's estimate of 839 million and down from last year's 950 million bushels.
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