Published on 17/05/2017 12:32:01 PM | Source: Angel Commodities Pvt Ltd

Global ending stocks decline for Soybeanand Cottonin 2017/18 but supplies remain at Record Levels - Angel Commodities


World Production to decline 2017/18

In its May 2017 USDA report, it has given forecast for 2017/18 production and trade for soybean and other oilseeds. Global oilseed production is forecast to grow slightly in 2017/18 while soybean production is projected to decline to 345 million tonnes (mt) from the current year’s record level of 348 million tonnes. The production estimates for the United States, Brazil and Paraguay is forecast lower due to decline in yield as per their historical trend levels. Soybean production in Argentina and India is projected to remain nearly unchanged.

The world soybean acreage is forecast to expand nearly 5% to 126.6 million hectares (mha) in 2017/18 compared to 121.1 mh in the previous year. The major increase in area is expected to occur in the United States. Planting intentions in the United States indicate a 7% rise in soybean area to a record 35.9 mha. However, a lower trend yield will result in a slight decline in production yet the coming harvest is projected to be the second largest on record.


Beginning stocks at all time high

The beginning stock for 2017/18 is projected at all time high at 90.14 mt, up by 17% compared to last year and 40% higher against 5 year average stocks.

Total global soybean supply is projected to rise 3%, despite the forecast of lower global production due to record carryover from 2016/17. However, continued growth in global demand especially from China and European Union (EU) will likely lower the ending stocks in the coming year.


World trade and Crush to Increase

* Soybean imports are forecast to rise, driven by strong demand in China, the European Union, Southeast Asia, and Egypt.

* Imports to China to jump 4.5% to 93 mt while European Union (EU) will import about 2.7% more soybeans in 2017/18 to 15 mt as compared to last year.

* Imports to Egypt to jump about 25% to 3 mt compared to last year. Thus, overall world import to increase to about 147.8 mt, up about 5% in 2017/18 compared to last year.

* Brazil and the United States will continue to be the main global soybean suppliers and forecast to export at record levels in 2017/18.

* Argentina and Canada are the other two exports of soybean in eh world market

* Strong global demand for animal feed will lead to a rise in crush by about 3.8% to 302 mt in 207/18. This will put downward pressure on stocks.

* Thus, soybean meal trade is forecast to expand, driven by strong increase in demand compared to last year. In EU the demand predicted to increase by 0.51% to 19.5 mt while in Vietnam 4.85%, Indonesia 3.5% and Thailand 1.7% increase. 

* Soybean oil trade is expected to further increase, mainly on India’s growing demand. India is the largest importer of soyoil in the world account for 35% of world soil oil volume.


Record production in 2016/17

However, global soybean production in 2016/17 exceeds last month’s forecast by 2 mt due to higher crop estimates for Brazil, Argentina, Paraguay, and Canada. Significant increase in production is seen in Brazil and Argentina due to good weather conditions during harvesting season.

Brazil soybean production for 2016/17 is estimated at a record 111.6 mt up 0.6 mt from last month’s estimate and up 15.1 mt from last year. Area harvested is estimated at a record 34 mha, while the yield is estimated at a record 3.28 mt per hectare, up 1 percent from last month and 13 percent from last year.

Similarly for Argentina, the production estimate is about 57 mt, up 1mt from the last month’s estimate and up only 200,000 tonnes from last year. In the weekly crop report, the Buenos Aires Grains Exchange, Argentina's 2016-17 soy crop is expected to be 57.5 mt citing high yields brought by wet weather as the reason for revising upward its previous estimate of 56.5 mt. Currently, the harvest is 66.5% complete, having advanced by 17.5% points during the previous seven days.

For 2016/17, the production estimates of soybean for the US increase by about 13.7 mt or 13% compared to its first estimate done one year ago on May 2016. Similarly, the production estimates increase by 8.6 mt or 8% for Brazil. 



World cotton production & consumption higher

For 2017/18, USDA projections for world cotton production to increase by about 7% to 24.7 million tonnes (mt) compared to last year production estimates. The consumption growth is also forecast higher since 2012/13 at over 2%. Global consumption is expected to remain above production for the third consecutive year in 2017/18.

The production is estimated higher due to higher estimation of world crop area by about 8% to 31.8 million hectares (mHa). The area forecast will be highest in three years. Larger crops are forecast for the United States, India, Pakistan, China, Turkey, and Australia, with only moderate growth in Brazil, Mexico, Egypt, Central Asia, and West Africa.

Meanwhile, production declines are anticipated in much of the Middle East and some African countries, such as Chad and Tanzania.

While all major producing countries contributed to the increase in production. The top four cotton producing countries – India, China, the US and Pakistan accounts for about 70% of the world production. India continues to be the largest production country for third season in a row followed by China and the US. The production in US is forecast to increase by more than 11.8% in 2017/18 to 4.2 mt, highest since 206/17 season.

World cotton consumption in 2017/18 is projected at 25.20 mt or 113.2 million bales, 2.3% (nearly 557,000 tonnes or 7.3 million bales) above the previous season and the highest since 2007/08. 

Strong consumption growth is forecast for Vietnam, Bangladesh, China, and India. More moderate consumption growth is expected in Bangladesh and Vietnam, as well as some Western Hemisphere countries such as Brazil, Mexico, and the United States. Consumption declines are forecast in South Korea, Taiwan, and several consuming countries in the Middle East and Europe.

China remains the leading consumer of cotton, projected at 8.2 mt (37.5 million bales) in 2017/18, up by 1.35% compared to previous year and the highest in last five years. China, India and Pakistan predicted to utilize about 62% of world cotton.

Cotton consumption is forecast to increase sharply for Vietnam and Bangladesh in 2017/18. India’s consumption, however, is forecast 1% higher than a year ago, reaching about 5.23 mt / 24 million bales in 2017/18.

For Vietnam, the consumption is going to increase by over 11.4% to 1.3 mt as compared to last year while in Bangladesh the consumption increased by 4% to 1.5 mt, This is mainly due to expand in textile investment in recent years as production costs—primarily labor—remain relatively low.


World Trade higher in 2017/18

Global cotton trade is projected at 8.2% or 37.6 million bales for 2017/18, up 3% above the previous season and the largest since 2013/14. Bangladesh continues to be the largest importer for the third consecutive year in 2017/18 and up about 12% to 1.52 mt compared to last year projections. The import volume also increases for Vietnam and China by about 14.8% and 4.21%. China’s imports increase only slightly as its policies aimed at reducing the State Reserve.

In 2017/18, the exports forecast from the United States are lower to 3.05 mt after increase significantly by about 58% in 2016/17 to 3.2 mt compared to previous year. U.S. cotton will face strong export competition as large Southern hemisphere crops will be available before the 2017/18 U.S. crop, and as the Franc Zone, Central Asia, and India will have both higher carry-in stocks and larger production. As a result, despite higher exportable U.S. supplies and growing world import demand, U.S. exports are forecast to be lower in 2017/18.

Though the exports have been projected lower, the US accounts for about 37% of total cotton export volume. The second largest exports is India with 7.22% higher export volume in 2017/18 at 0.98 mt. Comparatively higher exports have been projected for 2017/18 from the countries like Brazil, Australia and Uzbekistan.


Ending Stocks to decline in China

Stocks in China are forecast to fall substantially for the third consecutive year, with a decline of about 1.9 mt or 9 million bales due to continued strong and steady State Reserve sales. Despite their aggressive sales and a continuing recovery in consumption, stocks in China will remain very high with the ending stocks to-use ratio above 100 percent for the sixth consecutive year.

The situation outside of China is quite different. Production is forecast up in all major producers, resulting in the highest production outside of China in six years. Consumption will grow at a faster rate than within China as well (2.7 percent vs. 1.3 percent), but with higher global production stocks outside of China will rise to a near-record share of use for the first time in many years. 


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