THE US Department of Agriculture (USDA) paved the way for a rally in world oilseed prices with bullish data in its latest World Agricultural Supply and Demand Estimates (WASDE) report late last week.
The WASDE report had a surprise write-down in yield of US crops, down half a bushel per acre (bpa) to 49.5bpa.
Markets seized on this in trade overnight Thursday Australian time, pushing soybean values up sharply while canola also rose, albeit more modestly.
After a sluggish year, weighed down by heavy supplies of soybeans globally, there is now some scope for further price rises, especially with emerging crop production issues in South America.
The potential development of a late season La Niña weather event, consistent with drier than average conditions in South America, combined with current dryness in one of Brazil’s major soybean producing regions, Mato Grosso, has the market taking note.
“Market fears of planting delays are growing,” said CBA commodity analyst Tobin Gorey.
The rise in soybean values is welcome news to Australian canola producers, but Mr Gorey warned Aussie producers against expecting a big rise in values, instead saying it would more likely protect the market against potential falls.
“Canola prices are already at a hefty premium to soybeans,” he said.
Cheryl Kalisch Gordon, Rabobank senior grains analyst, said the oilseeds sector was the most buoyant of all grain markets, but added current market factors were far from bullish.
“Anything over 49bpa in the US is generally seen as bearish for prices,” she said.
“There’s also still a lot of low cost supplies of soybeans around.”
Other major grain markets are all being weighed down by the monster corn crop.
The WASDE report did little to dispel the gloom, putting in a highball US yield figure of 171.8bpa, a number Dr Kalisch Gordon said was around 1.7bpa above market expectations.
Massive crops in Ukraine and Russia have more than compensated for production shortfalls elsewhere, with the USDA upgrading its estimated world crop to 1.038 billion tonnes.
“Corn is a real burden on the world market, oversupply in key areas is keeping prices down,” Dr Kalisch Gordon said.
“This in turn spills over into other complexes such as wheat, limiting upside in that space.”
She said the market had largely factored in the final numbers of the North American crop.
“Corn and soybean yields in North America are largely known, the focus will now switch to South America.”
Along with the dryness in Mato Grosso, Dr Kalisch Gordon said the Argentinean grain belt would also be in focus.
“It was wet early on, now leading into their wheat harvest we are keeping an eye on their progress,” she said.
But the overwhelming conundrum of excess supply continues to be the major driver on grain markets and there is little respite on offer in the immediate future according to Dr Kalisch Gordon.
“We don’t see the supply situation easing for at least the next 12 months.
“This in turn will mean a continuation of the lower pricing environment and we expect the current lower price trading range to hold for some time without a major supply failure to force prices up.”