The graphic above illustrates another strong ending for the US summer soybean shipping season. (say that fast 5 times) If you have read any of my soybean analyses, you know I don’t believe the US soybean balance sheet is a good indicator of market value. The graph above is a good lead-in to the real story below.
While weather has been the major market factor and will continue to be for at least the next 2 to 4 weeks, by Sep 1 we will start to focus on demand.
WAOB (USDA) has underestimated world soybean imports by an average of 10% (11 mmt) for the last four years. This includes 16/17 as a partial year. Why have they missed it? That’s one of the next stories. One would expect most of the increase or estimate miss to be attributed to China – not true. The increase for China accounts for 36% of the change. The majority of the increase is coming from South Korea, Japan, Mexico, along with many others. To be clear, increase means the amount of change in the WAOB estimate from the beginning of the crop year to the end. The USDA miss may not be a major factor this year when there have been record crops in both North and South America. It could be a major factor for the 17/18 crop. It appears the world soy production for 17/18 will come in below last year by 5 mmt. If imports are underestimated by 10%, or 15 mmt, world carry out goes to 77 mmt vs. the current estimate of 93 mmt. 2015 carry out was 77 mmt, leaving very little margin for error. At the very least, the growing world demand will continue the acreage shift to soybeans, away from grains. My advice: don’t get too bearish on grains and oilseeds.