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Global oilseed market: U.S. soybean supply exceeded expectations, weighing on lower soybean prices

 Last Update: 2022-10-12
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Foreign media October 3 news: In the week ended September 30, 2022, global oilseed prices rose and fell, with soybean futures falling 4%, hitting a two-month low, mainly because the US Department of Agriculture released higher-than-expected
inventory of old beans.
The prospect of a global recession could hurt commodity demand, continuing to limit investors' risk appetite
.

The November 2022 soybean futures of the Chicago Board of Trade (CBOT) on Friday closed at around $13.
6475/pu, down 4.
3 percent
from a week ago.
The September shipping schedule US No.
1 soybean spot was quoted at an average of $15.
1725 per pu, down 2.
6%
from a week ago.
Chicago's December soybean meal futures were trading at $403 a short ton, down 4.
8 percent from a week ago; Chicago's December soybean oil futures were trading at 61.
56 cents a pound, down 3.
3 percent from a week ago; Euronext closed at around 633 euros/mt in November, up 4.
3 percent
from a week ago.
Intercontinental Exchange (ICE) canola closed at $852/mt in November, up 4.
1% from a week ago; Argentina's Upper River soybean FOB spot offer is $562 per ton (including 33% export tax), down 1.
4%
from a week ago.
On Friday, the Dalian Commodity Exchange reported a November 2022 soybean period of about 6,052 yuan / ton, up 2 yuan
from a week ago.
The ICE dollar index closed at 112.
084, down 0.
8%
from a week ago.

International crude oil futures rose slightly this week, ending a four-week losing streak as the OPEC alliance could cut production next week and the dollar retreated
from its 20-year high.
The Nov contract on West Texas Intermediate Crude Oil (WTI) on the New York Mercantile Exchange (NYMEX) closed at $75.
49/bbl, up 0.
95%
from a week ago.
The global benchmark December Brent crude futures were trading at $85.
11/barrel, up 0.
3%
from a week ago.

The risk of a global recession is in the crossfire, and the geopolitical risk is even worse

Global geopolitical risk events have been frequent over the
past week.
Early week, the Nord Stream 1 and 2 pipelines suffered blast damage and caused a huge methane leak
.
Nordic investigators say the blasts involved hundreds of pounds of explosives
.
Russian President Vladimir Putin on Friday accused the West of sabotaging the two Russian-built pipelines
.
Speaking in Moscow on Friday, Putin said the Anglo-Saxons had shifted from sanctions against Russia to carrying out "terrorist attacks" and that the destruction of gas pipelines was an attempt to disrupt Europe's energy infrastructure
.
U.
S.
President Joe Biden dismissed Putin's claims about the
pipeline.
He advised everyone not to listen to what Putin said, because what Putin said is not true
.
On the same day, U.
S.
Secretary of State Blinken said the destruction of the Nord Stream gas pipeline provided Europe with "a tremendous opportunity to get rid of its dependence on Russian energy once and for all and deprive Russia of the means to advance its ends by weaponizing energy.
"
The United States has long opposed the two Nord Stream gas pipelines and has repeatedly urged Germany to stop building them, saying the pipelines have increased Europe's energy dependence on Russia and reduced Europe's energy security
.

On September 28, Russia officially admitted Donetsk and four other regions to join the Russian Federation, while Ukraine formally applied to join NATO, which means that NATO is facing more and more possibilities of direct military confrontation with Russia, and the global geopolitical situation and energy insecurity have escalated sharply, which has weakened investors' risk appetite and speculated funds have fled into the US dollar
.
While the U.
S.
economy also faces challenges of high inflation and weak growth, the market sees a stronger
foundation than other major economies.
This could push the dollar index to challenge the 2001 high of 121.
00 in the short term, and possibly even hit a higher point
.

Analysts warn that a spike in the U.
S.
dollar could lead to a global crisis, as a spike in the U.
S.
dollar would not only hurt the profits of U.
S.
multinationals, but would also damage
dollar-based global trade.
On September 26, the exchange rate of the US dollar against the six major world currencies (the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc) soared to its highest level since May 2002; Meanwhile, the pound plunged against the dollar to record lows
.

Michael Wilson, chief equity strategist at Morgan Stanley, said the dollar's recent surge has left risky assets, including stocks and commodities, in an untenable situation
.
Both Goldman Sachs and BlackRock warned that the market has not yet priced
the risk of a global recession.
Ned Davis Research believes the probability of an imminent global recession is 98 percent
.

JPMorgan Chase & Co.
Commodities Research said that while a lot of money is fleeing risky assets, including commodities, the short volume of grain futures is bucking the trend and has now grown for three consecutive weeks, rising $2.
3 billion in the third week of September to a three-month high of $284.
2 billion
.
By comparison, other commodity markets lost $43 billion in short trade, falling to $1.
15 trillion, the lowest since February 2021, driven largely by
lower short volumes in crude oil and energy futures markets.

U.
S.
soybean ending stocks were higher than expected, with Chen bean production rising by 30 million pu

USDA's quarterly inventory report shows that as of September 1, U.
S.
soybean inventories were 274 million pu, up 7% year-on-year and exceeding market expectations of 242 million pu.

Among them, soybean stocks stored on farms were 62.
9 million pu, down 8% from a year ago; Off-farm inventory was 211 million pu, up 12%
from the same period last year.
Soybean use from June to August 2022 is estimated at 698 million pu, up 36%
from the same period last year.
For comparison, the USDA forecasts U.
S.
soybean ending stocks of 240 million potons
in its September supply and demand report.

On Friday, the USDA also raised its 2021 U.
S.
soybean production forecast by 30.
2 million poltons
.
Of these, the area under cultivation remained unchanged at 87.
2 million acres, but the harvest area was revised to 86.
3 million acres
.
Soybean yields were raised to 51.
7 pits per acre in 2021, an increase of 0.
3 deples per acre from previous estimates
.

Soybean harvest pressure is gradually emerging, and barge freight rates are soaring

As U.
S.
soybean harvest pressure grew, inland barge freight rates soared, sending U.
S.
soybean spot prices sharply lower
.
Soybean quotes on the Mississippi River have hit a year-low as draft restrictions have pushed barge freight rates to all-time highs
.
The load capacity of a single ship of U.
S.
soybeans is reduced by 38%.

The weather agency said the central United States was still dry, and while it was good for the harvest, it was not good for the water level to pick up
.

The USDA's weekly crop progress report shows that as of September 25, the U.
S.
soybean leaf drop rate was 63 percent, compared with 42 percent last week, 73 percent in the same period last year, and 465 percent
on a five-year average.
Soybean harvest progress was 8%, 3% last week, 15% in the same period last year, and 13%
in the same period last year.
Before the report, analysts expected an average soybean harvest progress of 11%, with forecasts ranging from 7% to 13%.

The soybean excellent rate was 55%, 55% last week and 58%
in the same period last year.
Before the report, analysts expected the excellent rate to stabilize at 55%.

Judging by weather conditions, Hurricane Ian will make its second landfall
off the coast of South Carolina on Friday night.
It can bring storms as high as 4 to 7 feet, and can bring wind storms and flash floods
.
Heavy rains in Carolina and southern Virginia could total 4 to 8 inches and localize nearly 12 inches
.
In storm-affected areas along the Atlantic coast, unharvested summer crops, including corn, peanuts and soybeans, are likely to experience a decline in quality
.
But mild and dry weather in much of the U.
S.
next week is good for soybean harvests
.
The National Weather Service's 6-10 day outlook for Oct.
5-9 said temperatures were close to or above normal in most areas and rainfall was close to or below normal
.

Exports were higher than expected

USDA's weekly export sales report shows that in the week ended September 22, soybean sales totalled just over 1 million tonnes in 2022/23, with China being the main buyer, with 548,700 tonnes purchased
.
Traders had predicted that soybean sales would be between
275,000 and 850,000 tons.

Argentina soybean production expected to increase by 15.
5%

On September 28, the Buenos Aires Cereal Exchange released its first production estimate for 2022/23, and Argentina's soybean production is expected to reach 48 million tonnes in 2022/23, up 15.
5% from 43.
3 million tonnes in 2021/22, as soybean acreage is expected to increase
after six consecutive years of decline.
The unfavorable weather prompted farmers to sow soybeans
in areas where they had intended to grow corn.
The exchange expects soybean area to increase by 400,000 hectares (988,421 acres) year-on-year to 16.
7 million hectares
in 2022/23.

The Argentine Ministry of Agriculture reported a surge in soybean sales from Argentine farmers, but overall sales continued to lag behind the same period last year
.
As of September 21, Argentine farmers had sold 28.
73 million tonnes of soybeans for 2021/22, up 1.
676 million tonnes from a week ago and down from 30.
55 million tonnes
in the same period last year.
Argentine Finance Minister announced on September 4 that between September 5 and 30, Argentine soybean growers sold soybeans at a settlement exchange rate of 200 pesos per US dollar instead of the official 140 pesos, which led to the enthusiastic sale of soybeans
by Argentine farmers.
In addition, Argentine farmers have pre-sold 1.
361 million tons of soybeans in 2022/23, an increase of 26,000 tons from a week ago and down from 1.
887 million tons
in the same period last year.

Argentine farmers sold more than 30% of their soybean production in September

The Rosario Grain Exchange said on Friday that Argentine farmers have sold 13.
9 million tonnes of soybeans since the introduction of the favorable exchange rate on Sept.
5, equivalent to 31.
6 percent
of the 44 million tonnes of production.
The measure will expire
on Friday.

Since September 5, the Argentine government has offered soybean farmers and exporters a favorable exchange rate of 200 pesos per dollar, which is much higher than the current official exchange rate
of around 147 pesos.
Argentine farmers sell soybeans on U.
S.
dollar quotes and then exchange them for pesos, so the preferential exchange rate offered by the government boosts farmers' sales revenues and stimulates a surge in sales, while the Argentine central bank gains valuable foreign exchange
.
Argentina's central bank accumulated about $5 billion in reserves during September, which is crucial
to achieving the goals signed between the government and the International Monetary Fund (IMF).

The EU raised its production expectations for rapeseed and sunflower seeds

On Friday (September 30), the European Commission raised its EU rapeseed production forecast for 2022/23 by 500,000 tonnes to 19.
3 million tonnes; At the same time, the sunflower seed production estimate will be raised by 400,000 tons to 10.
3 million tons.

By contrast, Strategic Cereals raised its EU rapeseed production forecast for 2022/23 to 19.
15 million tonnes in early September, 680,000 tonnes or 3.
7% higher than the August forecast of 18.
47 million tonnes and will be 12.
7 percent
higher than the 2021/22 production of 17 million tonnes.
Strategic Cereals lowered its sunflower seed production forecast to 9.
17 million tonnes, down 11.
3 percent
year-on-year.

U.
S.
soybean crushing is expected to fall to 5.
263 million short tons in August

The USDA will release its August Crushing Monthly Report
on Monday (October 3).
Analysts expect U.
S.
soybean crushing to fall to 5.
263 million short tons (equivalent to 175.
4 million pu) in August, down from a four-month high of 181.
3 million pu in July but well above 168.
2 million pu
in August 2021.
This will also be the second highest point in the same period in history, second only to the 177.
5 million pu
of crushing in August 2019.
Analysts forecast ranged from 174 million to 176 million pu, with a median of 175.
4 million pu.

August is usually one of the lowest crushing months of the year as the supply of soybeans harvested last year is reduced and the new season soybeans have not yet begun harvesting
.
Many processing plants shut down for maintenance in case of active pressing
in the fourth quarter.

Analysts expect U.
S.
soybean oil depots to fall to 2.
105 billion pounds on August 31, which would be a 13-month low, down from 2.
228 billion pounds at the end of July and 2.
183 billion pounds
at the end of August last year.
Estimates range from 2.
075 billion to 2.
140 billion pounds, with a median value of 2.
098 billion pounds
.

By comparison, data from the National Association of Oilseed Processors (NOPA) shows that last month its member companies (95% of the nation's crushing volume) crushed 165.
538 million pus of soybeans, down 2.
8 percent from July but up 4.
2 percent
from August 2021.
As of August 31, soybean oil inventories held by NOPA member companies fell to 1.
565 billion pounds, a 14-month low
.

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