Milling & Baking News - November 29, 2022 - 24

TUES | 11 29 202 2
projected by the USDA's August Crop Production
Report, the crop overall is wrapping
up somewhat better than expected. In
its November Crop Production Report, the
USDA estimated 2022 US soybean production
at 4,346 million bus and yield at 50.2
bus per acre, which was slightly higher
than the average trade estimates of 4,315
million bus at 49.8 bus per acre.
Even though the growing season is
complete, several factors continue to
influence the soybean market. Brian
Harris, executive director and owner of
Global Risk Management, a consultancy
firm specializing in commodity risk
the disparity there, " Mr. Harris said.
Data from the National and Oceanic and
Atmospheric Administration along with
other meteorological sites show that a La
Niña pattern, which supports arid conditions
along South America's West Coast
countries, is expected to persist through
February, which is at the heart of Argentina's
soybean growing season. It's not an
ideal scenario, but it's one Argentina is all
too familiar with.
" We've seen the same situation occur
over the past couple of years where we
start out with big ideas about what Argentina
production is going to look like only
NEARBY SOYBEAN FUTURE
$11.00
$12.50
$14.00
$15.50
$17.00
Dec.
2021
Source: CME Group
management, said macro and inflationary
pressures will continue to affect the
entire soybean complex, but the greatest
influences currently are South America
and China.
" Cash trader focus will definitely lean
toward South American weather, especially
if La Niña does some damage, and
also Chinese demand, " Mr. Harris said.
South America is the globe's leading soybean
producer and exporter, and Brazil is
the world's most prolific soybean supplier.
In early November, Conab, Brazil's national
food agency, projected the 2022-23 soybean
crop at a record-breaking 153.5 million
tonnes, surpassing last year's record of
143.75 million tonnes. With near ideal
weather conditions throughout much of its
planting season, some analysts expect this
number could go even higher.
Argentina, the planet's third largest soybean
producer and the leading exporter of
soybean meal and soybean oil, is another
matter as weeks of prolonged drought have
stalled that country's planting progress.
" Currently, Argentina is only about
25% planted, but last year at this time they
were almost 80% planted, so you can see
24 MILLING & BAKING NEWS
to have it trimmed because of the drier La
Niña patterns, and it was trimmed significantly
last year, " Mr. Harris said.
In its 2021-22 season, Argentina
expected to harvest nearly 50 million
tonnes of soybeans but ultimately only
produced 44 million tonnes.
With similar weather patterns occurring
for the world's leading exporter of
soybean byproducts, plenty of risk premium
is available to support firm domestic
soybean prices.
" Everyone is crisply aware of what we've
seen these past few years where we start
out like a house on fire, but by the time we
get to late December and early January,
things aren't looking so good and we're
starting to trim yield, and that's what the
trade doesn't want to see, and that's why
you're seeing a little premium retention in
the market right now, " Mr. Harris said.
Export demand from China is another
potentially supportive element for firm
soybean prices. China, the world's leading
importer of soybeans, historically has
been a steady buyer of US soybeans as it
waits for the discounted South American
soybeans to hit the market. But China's
Jan.
2022
Feb.
March
April May
June
July Aug.
Sept.
Oct.
Nov.
zero-tolerance COVID policy has kept
the entire global market on edge as the
country's continuous barrage of lockdowns
has led to pressured demand for
all commodities. However, China hasn't
been completely absent from the export
market, and the United States is still trying
to capitalize on its approximate 60-day
window to sell soybeans (before South
American supplies hit the export market),
which tends to support rising prices into
the first quarter. But some analysts wonder
just how much higher soybeans prices
can go, especially since they're already
starting out pretty firm.
" Spot soybeans are $1.75 a bu higher
than they were last year, so we've already
got quite a bit of premium built into the
bean market, and if we don't have a fairly
significant South American weather problem
and Chinese demand starts to slip
away at the end of December, then you've
got to ask just how long can we maintain
these types of numbers, " Mr. Harris said.
One product from the soy complex that
has not been a major export player in
recent months is soybean oil along with
other domestic vegetable oils.
" The US vegetable oil markets are on
an island; whether it's crude premium
or refined premium, they're way above
anything else out there, and while they've
come down in recent months, they're still
at levels nobody expected to see at this
time, " Mr. Harris said.
On Nov. 11, soybean oil settled at 76.97¢
a lb, 38% higher than what it settled at
during the same period last year and
nearly 130% higher than the year before.
The single driver behind the surging
value is the fervent demand from the
renewable diesel sector.
The Energy Policy Act of 2005 created
the Renewable Fuel Standard (RFS)
program, which is implemented by the
Environmental Protection Agency and
requires that a certain volume of renewable
fuels replaces petroleum-based fuels.
Each year, the EPA is required to evaluate
renewable fuel usage and adjust RFS volume
requirements. Since the program's
inception, the volume requirements
have risen every year. The next round
of requirements will be announced on
Nov. 30, and analysts are expecting the
requirement to increase again.
" When you walk down an aisle at a grocery
store, about one out of every three
things you see has some vegetable oil in
it, and that's a big driver of grocery store
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Milling & Baking News - November 29, 2022

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