DTN Analyst Todd Hultman's Todd's Take column titled "It Needs to be Said" which is due to be released on Tuesday, focuses on the USDA's track record in estimating soybean demand/ending stocks, which he views as 25 years of bearish bias. In his report, Todd shows how USDA has over-stated soybean ending stocks by a substantial margin on average in the May report for the following crop year over a 25-year period, while the October report continues to reflect an over-stated ending stocks figure for the crop year, which acts to artificially inflate supplies while pressuring prices.
Perhaps extreme caution has been taken in the current crop year estimates as well? Estimates for Brazilian soybean production have been increased 4% from last year to 100 million metric tons, according to the USDA. As well, the Brazilian currency, the real, has weakened from a high of $2.10 per dollar in June 2014 to $3.90 US/BRL today, making that country's exports more affordable to importers in U.S. dollars.
There exists a mixed signal on the demand side, with China's third quarter GDP being reported at the lowest level since 2009 at 6.9%, which has increased concerns across a number of commodity markets. At the same time, China's demand for soybeans has shown no signs of slowing, with recent September official Chinese data indicating January through September imports at 59.65 mmt, up 13% from the same period last year. September imports are increasing at an even faster pace and at 7.26 mmt, are 44% higher than September 2014. Data for canola/rapeseed imports should be available in a few short days.
Monday's export inspection data for last week from the U.S. shows year-to-date inspections up 15% from last crop year and well above the USDA's expected reduction of exports of 9% in the 2015/16 crop year.
Agriculture and Agri-Food Canada have faced challenges this season, with the 2015 production potential at one time pegged as low as 12.5 mmt by trade participants only to see late summer rains improve conditions to the point that trade talk is suggesting the possibility of a 15 mmt crop or higher. Previous year adjustments to stocks by Statistics Canada have also substantially increased this crop year's carry-in to 2.3 mmt. Demand has not slowed.
As seen on the attached chart, the cumulative canola crush reported by Canadian Oilseed Processors as of October 14 is above the same date reported last year and the five year average. Exports are only slightly behind year-ago levels as of week 10 and well ahead of the five-year average.
While the November/July spread has weakened over the past couple of sessions to an $8/metric ton carry (July trading above the November), this is $4/mt narrower that the $12/mt reported for the similar date last year and also narrower than the $16.10/mt average over the past five-years for this date, continuing to reflect a mildly bullish structure in this market through the end of the crop year.
Cliff Jamieson can be reached at email@example.com
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