The soybean rally surmounted data showing a surprise fall in
US consumption of the oilseed as investors questioned the role of cold US
weather, besides being spurred by Brazil's dryness to inject more risk premium
US oilseed processors crushed 156.943m bushels of soybeans
last month – well short of the 162.4m bushels that investors had expected.
The figure, from the National Oilseed Processors Association,
was also below the record 165.4m tonnes in December, besides the 158.2m bushels
reached in January last year.
However, the data did little damage to a rally in soybean
futures, which for March stood 1.6% higher at $13.59 a bushel with about an
hour's trading to go in Chicago, setting course for what would be the highest
close for a spot contract in five months.
Demand, or weather?
The resilience reflected in part doubts that the NOPA data showed
a true picture of soybean demand, coming for a month when US logistics were tested
by the "polar vortex" which brought record-cold temperatures to many areas.
"You have to ask whether the lower crush figure was because
of weaker demand, or down to the weather," Jerry Gidel, chief feed grains
analyst at broker Rice Dairy, told Agrimoney.com.
The strong soymeal basis – the cash price over futures - indicated
"that there was no shortage of demand".
Separately, CHS Hedging said that the "cash soymeal
continues to drive the market, breaking contract highs".
In fact in Chicago, May soymeal futures, the best-traded
contract, touched $13.47 ¾ a bushel on Tuesday, still short of its high of
$13.95 ¾ a bushel set in August 2012.
'Taken a toll'
Meanwhile, concerns over damage to crops from the dry
weather in Brazil also supported soybean prices, with particular focus on a
downgrade by analysis group AgRural of 1.8m tonnes, to 87m tonnes, in its forecast
for the South American country's harvest.
While still a record, this is below the 90.0m tonnes
estimated by the US Department of Agriculture, whose data set world benchmarks,
and Brazil's Conab bureau.
"A heat wave in Brazil and the country's driest rainy season
in decades have taken a toll on parts of Brazil's production areas," Iowa-based
broker US Commodities said.
"Parts of Mato Grosso and Parana, Brazil's biggest producers
of corn and soybeans, received less than 60% of normal rainfall in the past 90
In fact, Mato Grosso is reckoned to have got off relatively
lightly, with crops sufficiently developed to avoid significant damage from dryness
– indeed, harvest is now an estimated 37% completed – while some parts of the
state actually received a surplus of rain.
However, "in areas of northern Parana, some soybean yields
are down as much as 45%," said Michael Cordonnier, the respected crop scout.
"It is the later-planted soybeans that have been most
impacted because the hot and dry conditions occurred during the critical pod-filling
He added that Sao Paulo, better known for sugar cane and
orange production, "has been one of the hardest hit areas and the Secretary of
Agriculture in the state estimates that some soybean yields in the state might
be down as much as 40%".
Separately, analysis group Oil World on Tuesday cut to
12m-13m tonnes, from 16m tonnes, its forecast for the growth in world soybean
inventories this season, citing a "severe moisture deficit" in Brazil in
January and early February.
This had cut production potential for Brazil and parts of
Paraguay - where the government warned that the dryness would cut output to
8.6m tonnes from the 9.3m tonnes seen last year, and which the USDA has
forecast will be repeated this time.
However, Oil World flagged that world soybean output will
still "turn out sharply above estimated consumption… But the surplus will be
less than expected previously".
Soyoil - the other main product, with soymeal, from processing
soybeans – also performed strongly on Tuesday, standing 2.4% higher at 40.42
cents a pound for May delivery.
The NOPA data showed US soyoil stocks last month at 1.794bn
pounds, up 112.9m pounds month on month, but some 47m pounds below market
Furthermore, palm oil, the rival vegetable oil, closed
higher in Kuala Lumpur, up 1.2% for May delivery at 2,714 ringgit a tonne, the
best close for a benchmark contract since September 2012.
The rise in palm oil has been fuelled by data from cargo
surveyors showing a surge of some 30% in Malaysian palm exports in the first
half of this month.
"The revival in exports is mainly caused by tight oilseed
supplies, causing oilseed prices to hike," Singapore-based broker Phillip
"As such, it provided an incentive to overseas buyers to
switch to palm oil as a cheaper food and biodiesel alternative. This will boost
"Furthermore, the end of winter in northern hemisphere countries
will encourage more buying of palm oil," whose relatively high solidification
point makes it unsuitable as a raw material for making biodiesel for use in