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Photo by Jana Carlson, Courtland, Kansas.

The big news in the latest World Agricultural Supply and Demand Estimates release Oct. 12 by the U.S. Department of Agriculture was the upward revision to yield estimates for soybeans. Total yields did much better than expected in earlier estimates—including in drought-stricken areas.

The new yield estimates were raised by just under one bushel per acre, to 51.5 bushels per acre, resulting in an upward bump of 114.7 million metric tons, or 4.48 billion bushels. Soybean meal numbers were adjusted upward by 300,000 short tons. Ending stocks were raised by 135 million bushels to 230 million bushels (8.7 million metric tons).

The adjusted soybean export totals of 61.7 million metric tons for the 2020 season set a new single-season record. Randy Mittelstaedt, head of market research for RJ O’Brien, Chicago, Illinois, said the total adjusted increase was about 2% up from the September estimate. The upward adjustment was the biggest in the past eight years, and the second biggest in the past 14 years. “The crop was more advanced this year than in past years.,” he added, meaning there’s less likelihood of further dramatic adjustments.

Oil balance sheet

Mac Marshall, vice president of market intelligence for the United Soybean Board and the United States Soybean Export Council, said the WASDE included another surprise: a slight upward adjustment in the soybean oil balance sheet, indicating dampened domestic demand for soybean oil.

“Domestic usage was weaker than expected,” said Mittelstaedt. The new estimates lowered domestic usage by 575 million pounds.

The two men discussed the changing picture for soybean oil in a USSEC webinar Oct. 12. Mittelstaedt said the biodiesel production numbers were “somewhat disappointing,” but added that they provided a “reality check” to the fevered optimism about pending demand for soybean oil after the election of Joe Biden sent soybean oil prices on a wild ride earlier this year.

“The growth [in domestic demand for soybean oil] will be there—eventually,” said Mittelstaedt. “But the reality is that it will take years for all the investments in new crush and refining facilities to be completed.”

Foreign oil, meal demand

Kevin Roepke, regional director of USSEC for South Asian markets, discussed the changing picture of demand for both soybeans and soybean oil in his market regions, which includes India, Pakistan, Bangladesh, Sri Lanka and Nepal. India is the world’s largest importer of veg oil by far, importing three times the amount as China, the next-largest importer, which in turn imports twice as much as Bangladesh.

Palm oil is a competing oil with soybean oil, but its price is also high, due to many factors, including labor restrictions because of COVID-19 that slow the movement of palm oil harvest workers to Malaysia, a top regional palm oil producer.

In a sign of its urgent needs, India recently made a one-time allowance for the importation of GMO soymeal, via a ruling that it was a “denatured” product that didn’t include active seeds and thus didn’t fall under the authority of the agricultural regulator. Under that window, it allowed the import of 1.24 million metric tons through October. That was later extended to orders with bills of lading in October, but delivery dates through January 2022. Roepke called this exemption a “historic achievement” that could pave the way for more such imports and later for U.S. soy products. “We’re working to get as many soybean meal markets on the docket as possible” in the region, he said.

Marshall noted that soybean oil is “a bigger share of the enterprise value of soybeans” now. Mittelstaedt delved deeper into the soybean oil picture, saying the market could “be heavy on the meal side in the next 12 months.” He noted the USDA’s quarterly hog report had lower than expected numbers for U.S. hogs. Chinese hog prices are “severely depressed,” possibly reflecting hog liquidation efforts yet again as African swine fever resurges in some areas, combined with Chinese logistics and energy issues that could be slowing the move of its hog production to larger facilities from family operations.

Mittelstaedt noted one significant sign: no USDA announcements of major hog sales to China after a week-long Chinese holiday when such sales are normally announced.

Marshall said trying to interpret the Chinese numbers was like trying to distinguish “weather” from “climate”—i.e., trying to tease out temporary local causes from longer-term trends. Both men agreed that while soybean exports to China could be “quiet” in the next few months, the longer-term trends are still encouraging.

David Murray can be reached at journal@hpj.com.

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