Global Markets: Soybeans – Prices Fall on Rising South American Production

    Soybean prices declined in March in response to rising projections for the 2017 South American harvest. November futures prices on the Chicago Board of Trade (CBOT) fell 7.5 percent, ending the month below $10/bu for the first time since mid-January.

    Cash prices quoted for Central Illinois fell 10 percent in March with continued price erosion into early April. Cash prices are flirting with $9.00/bu, the lowest they have been since early April 2016. This is a far cry from last year when late-season dryness in Brazil reduced yields and flooding rains in Argentina cut harvested area leading to a run-up in cash soybean prices that touched $11.50/bu in early June 2016.

    Compounding the downward pressure on prices in March was the release of USDA’s Prospective Plantings report on March 31. This report showed additional soybean plantings in the United States for 2017, pushing prospective U.S. acreage further into record territory.

    Using the trend yield reported in the February USDA Outlook Forum, 2017 production could approach last year’s record volume and possibly add to global soybean stocks.

    Current price levels have flattened as the potential for further production gains in South America have likely been factored into the November futures price. Since the end of March, November futures have remained near $9.50/bu while the Central Illinois Cash Price has remained near $9.05/bu.

    Over the next few months, the market’s attention will likely turn away from South American production and toward demand factors and U.S. planting progress. Both February and March exports from Brazil reached record levels and U.S. sales remain strong into the latter half of the marketing year.

    With prices at their lowest level in 12 months, any signs of increased buyer interest or weather issues negatively impacting the U.S. crop could boost both futures and cash prices.

    Pakistan: Early season rapeseed imports lead to slowing soybean demand

    With a growing economy and expanding poultry industry, Pakistan was expected to see a large jump in soybean imports in 2016/17. Early season trade trends, however, suggest a different situation.

    Trade data for the first quarter of 2016/17 suggests that the pace of soybean imports is similar to, if not slightly outpacing that of last year. In contrast, rapeseed imports, primarily from Canada, have shown significant growth over the past 12 months ending in February 2017. Canada rapeseed has provided some relief to the domestic crushing industry, simultaneously satiating the strong demands for vegetable oil in the domestic market.

    Given rapeseed’s higher oil yield, imports of Canadian rapeseed have temporarily dampened the need for soybean imports, but increased the demand for soybean, sunflower and palm kernel meals to compensate for the lower protein meal output. These developments seem to have slowed soybean imports in the early months of the marketing year, while supporting other protein meal imports.

    Going forward, the large South American soybean crop is pressuring prices and has the potential to spur additional soybean purchases by Pakistan. However, it is unlikely that soybean trade will be large enough to boost imports over the levels of 2015/16, as thought during the initial forecast. Considering all factors, USDA has lowered the soybean import estimates for Pakistan to 1.35 million tons, a robust 8% growth over 2015/16.

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