What is in this article?:
- Soybean prices strong despite oil drag
- Small South American harvest
• From the June low to the September peak, January 2013 soybean futures increased by 43 percent, January soybean meal futures increased by 51 percent, and January soybean oil futures gained 20 percent.
• Soybean oil futures are now back to the level of early June, while soybean futures are 13 percent above the early June level and soybean meal futures are 21 percent higher.
Small South American harvest
“The large early export pace is supported by the small South American soybean harvest earlier this year and will likely slow after the first of the year as confidence in the 2013 South American crop increases,” Good said.
“The prospects for very small inventories of U.S. soybean oil by the end of the marketing year, however, underscore the importance of a rebound in South American production.”
Domestic consumption of soybean oil for purposes other than biodiesel during the current marketing year is projected at 13.1 billion gallons, 310 million gallons less than consumed last year. Consumption is expected to be limited by larger supplies and consumption of other vegetable oils, particularly cottonseed oil and peanut oil.
The consumption of soybean oil and all other fats and oils for methyl ester (biodiesel) production has not been reported by the Census Bureau since July 2011, Good said.
The USDA’s World Outlook Board indicated that it relies on data reported by the U.S. Energy Information Administration to estimate the amount of soybean oil used for biodiesel production.
“Biodiesel production totaled 723.3 million gallons during the 2010-11 marketing year and 928.9 million gallons during the first 10 months of the 2011-12 marketing year,” Good said.
“The estimate for August 2012 will be available on Nov. 28. Production for the marketing year may be near 1.13 billion gallons. For the 2011-12 marketing year, the USDA estimates that 4.9 billion pounds of soybean oil were used for biodiesel production, up from 2.737 billion pounds in the previous year.
“That estimate implies that soybean oil accounted for about 57 percent of the feedstock used in the production of biodiesel, compared to about 50 percent in the previous year,” Good said.
For the current marketing year, Good said the USDA also projects soybean oil consumption for the production of biodiesel at 4.9 billionpounds. However, the EPA has increased the minimum amount of domestic biodiesel consumption from one billion gallons in 2012 to 1.28 billion gallons in 2013.
The increase of 280 million gallons will require about 2.1 billion pounds of additional feedstock if biodiesel trade remains at the same level as in 2012.
“Biodiesel production could also exceed the minimum requirement in order to meet the advanced and total biofuel mandate for the year,” Good said.
“The USDA projection of soybean oil consumption implies that most of the increase in biodiesel production in the 2012-13 marketing year will come from feedstock other than soybean oil. Alternatively, soybean oil consumption will exceed the current USDA projection.
“In the first eight weeks of the 2012-13 marketing year, soybean oil prices averaged 48 cents per gallon, well below the USDA projection for the year,” Good said.
“With demand potentially stronger than currently projected, the increase in prices that began two weeks ago is likely to be extended. Unless the biofuels mandate is amended, price strength could extend well into the future,” he said.