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Is it time to rethink US soybean crush forecasts?

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US soybean processing demand, and soymeal exports, are beating expectations, but does this call into question the US Department of Agriculture's recent downgrade to US crush numbers?

This month the USDA trimmed its estimate of 2016-17 soybean crushing by 20m bushel, to 1.93bn bushels, citing weaker soymeal export demand.

"Sales are lagging year-earlier levels to several markets including Mexico, Canada, Thailand, and the European Union," the USDA said.

Rising processor demand

But since then, both crushing and exports have been surprising with their strength.

Accord to data from Nopa, the main trade body for the US soybean crushing industry, processing in October hit the third-highest monthly level on record.

Nopa members crushed 164.641m bushels of soybeans in October, some 4m bushels above tade forecasts.

Crushing was up 3.6% year on year, and a up 27% from the previous month.

And Nopa reported October soymeal exports at 562,180 tonnes, down 13% year on year, but up 28% from September.

"The October Nopa crush was very large, in our opinion, and friendly for soybean futures," said Terry Reilly, at Futures International.

Brisk exports

And the latest soymeal export figures were supportive as well.

US soymeal export sales were reported at 437,499 tonnes in the week to November 10.

This was over three times the pace of the previous session's sales, and up some 76% on the 4-week average, and well ahead of analyst expectations.

South American competition

But broker Benson Quinn Commodities International was cautious on prospects.

Speaking to Agrimoney, BQCI noted that the despite strength in the recent week, exports are under pressure, and "shipments are slow".

With the strength of the dollar in the wake of the US elections, competition from South America is intensifying.

"It does sound like Argentina is getting more aggressive," BQCI said.

"If the dollar remains strong that will impact crush and meal demand,"

Hitting the target

And while the Nopa number may be large, but the USDA's export number requires processors to crush at 102.2% of last year's pace, even after the downgrade.

So with September-October crushing up 2.9% year on year, the pace is so far only a touch ahead of expectations.

But even if no upgrade is expected to the USDA figure, scepticism over the USDA's figure is receding.

Paul Georgy at Allendale said the number "put the estimated crush this year on target with USDA's goal".

Mr Reilly said the upgrade had prompted Futures international to raise their crush expectations by 10m bushels, to 1.925bn bushels, but this is still 5m bushels behind the USDA's figure.

By William Clarke

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