Brazil represents a bigger threat to the US in corn rather than
soybeans in export markets, for now, the head of Archer Daniels Midland said - while
forecasting a boost in oilseeds from wheat dynamics too.
Juan Luciano, the ADM chief executive, flagged the threat to
US crop trading "because we're going to get all these potential exports from South
America" during the July-to-September quarter, following strong corn and
soybean harvests in the likes of Argentina and Brazil.
Brazil's 2016-17 corn production, including the ongoing
safrinha harvest, will end up 45% above last year's drought-affected levels, at
97.0m tonnes, with soybean output up 18.1% at a record 114.0m tonnes, on US
Department of Agriculture estimates.
It is the country's bumper corn harvest which looks like
providing particular competition to US trade, thanks in part to continued
knock-on effects of Brazilian growers reluctance to sell soybeans in particular
at prices dented by strengthening the real as well as by softer international
Brazilian soybean prices, at R$69.98 per 60 kilogramme bag,
are down 15.5% over the past year, according to data from research institute
Cepea, compared with a 2.0% decline in dollar-denominated Chicago futures.
"Talking about Brazil, if you think about soy, the farmers
probably have sold about two-thirds of it, and it would compare to about over
80% a year ago," Mr Luciano told investors.
"New crop [2017-18], at the moment, probably maybe 8-10%
versus maybe 15% a year ago."
For corn, however, sales of 2016-17 crop, at about half of
production compare with "maybe 55% a year ago".
And this trend will be reflected in shipments.
"I would say we'll probably see Brazilian farmers, or
Brazil, exporting more of the corn and holding a little bit more of the beans
as they go forward," Mr Luciano said.
'More aggressive in
The trend also reflected a demand dynamic, in that Brazil does
not "have a big domestic market for corn.
"So I think that if you're a farmer, you try to position in
taking the export opportunities, while you can hold a little bit more on
soybeans because, eventually, you still have… domestic crushing that you can
place those volumes later on in the season.
"That's where we see the pattern, probably South America
more aggressive in corn exports and maybe the US being able to compete in
soybeans a little bit more during the second half [of 2017]."
Slow pace of orders
The comments will come as a relief to soybean traders, after
an unusually weak pace of forward sales so far of US supplies for 2017-18, which
starts next month.
As of July 20, the US had received export orders for 6.03m
tonnes of soybeans for delivery next season - a slump of 39% year on year.
And Mr Luciano flagged the prospect of "strong domestic [US]
demand" for soybeans too in the second half of 2017, after a period "softer
demand" in the first half of the year, reflecting factors including the overspill
of distillers grains (DDGs) after China imposed hefty taxes on US exports of
the corn-derived feed ingredient.
"We have taken this year the impact of the DDGs shift from
China not importing that anymore. So we've absorbed that."
Feed vs milling wheat
Furthermore, the market has "for the most part… cleared with
all the inventory of low-quality feed wheat that was competing" with oilseed
meals for a place in feed rations.
"Most of the feed wheat… the market has basically consumed
over the second quarter."
Meanwhile, the wheat market will present a further
opportunity for ADM, in the need to secure sufficient supplies of higher
protein grain, after drought dents to North American harvest prospects.
"We see that our ag services business will benefit from our
ability to segregate high quality wheat as we go into the second half," Mr