Soybean Oil Exports Challenged By Record S. American Harvest

16 March 1998 00:00  [Source: ICB Americas]

US Soybean oil is facing an uncertain future after a recent good run. Demand remains high, but the oil's unrivaled export stature is no more as the South American harvest commences.

The US has been the only exporting country since late November, but industry observers are expecting a record crop from South America because of an increase in both yield and acreage. With the harvest already 12 percent completed, traders are looking for South America to begin exporting soy oil soon. "South America will be the major exporter for the next six months," says an industry observer.

In response to the record harvest in both the US and South America, the USDA has raised its forecasts of global soy oil exports to 6.3 million tons, a 109,000-ton increase. The forecast for US exports is now 22 percent higher than the year-earlier level of 1.1 million tons.

A record US crush of soybeans had added more than 200 million pounds to US stocks since October, but USDA has recently lowered its stock estimates to 1.4 billion pounds for this month.

Soy oil prices rallied late last week as US crushers began to slow down in response to the South American harvest. Soybean oil was up to 27.7 cents per pound, more than 1.2 cents higher from the prior week and up sharply from January.

Another reason for the price jump was a tightness in competing oilseeds, such as sunflower and palm. A disappointing sunflower harvest in Europe has contributed to the recent rise as Europe uses soy oil in place of sunflower oil.

Palm oil prices are several cents higher than soy, and anyone who can use soy has switched to it. Palm usually trades at a significant discount to soy, but with troubles in Indonesia and an uncertain harvest because of El Nino (CMR 3/2/98, pg. 8), palm prices are almost a nickel higher than soy.

USDA has raised its global soy oil import forecasts for 1997-98 by 128,000 tons to 6.3 million tons, based on expected growth in soy oil demand in China, caused primarily by the high price of palm oil.

As Asian countries begin to rebound from their financial crisis, the difference in price between soy and palm oils has led them to import more soy oil than usual. "Soy is a better value right now, so it's simple economics," says one trader.

As the soybean crush slows, US producers are looking to soy oil to pick up a greater part of the soy complex. Soy oil usually accounts for about 30 percent of the value of the soy complex, with soy meal picking up the remainder. But as South America takes over in exports, US producers will look to soy oil to hold its current high prices. Crushers are hoping to avoid a repeat of last summer when soy oil fell to only around 27 percent of the value of meal, which led one industry insider to refer to oil as "a true byproduct."

As far as this year's crop is concerned, flooding in the South may slow down initial plantings, but the industry remains confident. On March 31, the USDA will release the total acreage it expects to be planted in the US this year.

SOYBEANS--Pioneer Hi-Bred International Inc. plans to invest $3 million to expand its soybean processing plant in Litchfield, Ill. The company says the project will be completed by October, improving the plant's capacity and automation.

"Our capacity to receive soybeans will increase from 2,000 to 5,000 bushels per hour," says Tom Hall, manager of the plant. "Soybean conditioning will be expanded from 550 units to 1,000 units per hour, and the total number of seed contract acres with area farmers will increase by 40 percent. The total units produced at the plant will grow from 1.2 million to over 2 million annually."

The upgrade includes expanding the conditioning plant, adding an additional entrance, remodeling the receiving area and installing new soybean conditioning equipment. New technology to be implemented at the plant will allow one operator to monitor both receiving and conditioning activities, Mr. Hall notes.

MONSANTO COMPANY says crop acreage for its Roundup Ready brand of transgenic soybeans will top 20 million acres in the US in 1998 and could double again the following year, according to published reports.

Plantings of Roundup Ready corn, which will be grown on an estimated 600,000 acres this year, are also growing, though not as swiftly as its soybean counterpart.

SAIPOL--The European Commission has cleared plans by Cereol France, a member of the Eridania-Beghin-Say group, and Sofiproteol to acquire control of oilseeds processor Saipol. The Commission said it expects the new company will face stiff competition from US oilseeds giants Cargill and Archer Daniels Midland, as well as smaller independent operators.

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