In South America soybean production prospects have improved considerably owing to last-minute rainfall. For the five major South American producers we now estimate soybean output at 127.6 Mn T this year, an upward revision by 2.4 Mn T from three weeks ago.
For April/Sept 2011 we forecast world exports of palm oil at 19.4 Mn T, up 1.3 Mn T from a year ago. If thismaterializes, palm oil prices will come under pressure and widen their discount vs. soya oil.
Prices of lauric oils skyrocketed to record levels in recent days. This season’s supply shortage in lauric oils is the most severe in many years. We forecast world production of coconut oil and palmkern oil to be down by 0.1 Mn T in 2010/11.
Some Price Setbacks on South American Rain and onIndications of Demand Rationing
The arrival of much needed rainfall in most of the dry soybean growing regions of South America is to be seen as one of the major bearish factors during the past ten days. These rains, which partly came almost at the last minute, resulted in a sharply improved production outlook. Rains in many critical regions of Argentina were above normal during the past 6-10days and there are strong indications of additional rainfall in the first half of February.
This week we have made an upward revision by 2.4 Mn T in our South American soybean crop estimate as compared to 3 weeks ago. For Argentina our new-crop estimate of 48.0 Mn T is still down sharply from last year’s 54.4 Mn T.
The net effect is reflected in a somewhat better global supply outlook forsoybeans as well as for soya oil and meal for 2011.
Palm oil: Prices increased steeply to a new high of around US-$ 1280 in January (in Rotterdam), up 60% from a year earlier and up even 162% from the low of US-$ 488 registered in Nov 2008. Palm oil lost competitiveness relative to other vegetable oils. This was necessary in recent months, owing to surprisingly low Southeast Asian production.The steep price rally in agricultural commodities is mainly a reflection of strong global demand and insufficient world production. As a result, the stocks of most agricultural commodities are declining to critically low levels relative to consumption. This will result in an intensified fight for acreage in 2011, keeping prices well supported. The downward potential of the prices of oilseeds,vegetable oils, grains and other agricultural commodities is limited because high prices are needed until the structural global production deficit has been overcome by sufficiently stimulating production and/or by curbing consumption.
Favourable Rains in South America Came Still in Time for Oilseeds
We have raised our South American soybean crop estimate by 2.4 Mn T from three weeksearlier. – Global
production of 7 oilseeds are still likely to be below the prospective consumption, cutting stocks to uncomfortably
low levels in many countries at the end of the world crop season (July or Aug 2011).
In our revised projection we place world output of 7 oilseeds at 432.5 Mn T in 2010/11, down slightly from the record 433.1 Mn T registered last season.
It is possiblethat the Brazilian soybean crop will exceed last year’s record level of 68.7 Mn T. At the
moment we still peg the crop at 68.5 Mn T but several observers argue that it may reach at least 69.0 Mn T.
Oilseed trade & crushings accelerated so far this season. The unusually low production and supplies of palm oil necessitated higher processing of oilseeds to satisfy demand for oils. With worldproduction of high-oil yielding oilseeds declining sizably (primarily rapeseed and sunflowerseed), the world market has become increasingly dependent on soybeans.
In South America soybean production prospects have improved considerably not only in Argentina but also in Paraguay, Uruguay and southern parts of Brazil. The impact of La Niña has weakened in that region, resulting in a...