Raise in the forecast of world oil production by USDA experts intensify pressure on prices

МСХ США USDA

In the August balance sheet, USDA experts raised forecasts for world production and stocks of oilseeds in FY 2022/23, which is in line with June estimates. The increase in soybean, rapeseed and sunflower harvest estimates increases the pressure on the prices of oilseeds and their processing products.

At the same time, the oil trade forecast has been lowered again, primarily due to a reduction in soybean exports from Brazil, as well as an estimate of vegetable oil consumption, especially for China. If the PRC economy continues to slow down, the country’s consumption of oil in FY2022/23 may fall again, which will increase pressure on the markets.

In comparison with the July report, the oil balance for 2022/23 MR underwent the following changes:

The global production forecast has been raised by 2.93 million tons to 646 million tons, which will exceed the 600.47 million tons collected in FY 2021/22 by 7.7%. In particular, the forecast for the rape harvest was increased by 2.25 million tons to a record 82.48 million tons (72.31 million tons in 2021/22 MR), soybeans – by 1.39 to 392.79 (352.74) million tons, sunflower – by 0.55 to 50.93 (57.32) million tons.

The estimate of global oil processing was increased by 2.46 million tons to 531.88 million tons, which will be 4.2% higher than the figure of 2021/22 MR – 510.54 million tons.
The forecast of the world import of oilseeds has been increased by 1.2 million tons to 192.25 million tons, which will exceed the 2021/22 financial year figure of 176.5 million tons by 8.9%.
The estimate of world ending stocks was increased by 2.21 million tons to 120.72 million tons, which will exceed the 108.82 million tons of the 2021/22 season by 10.9%. Soy stocks will grow the most in China and Argentina, and rapeseed in Australia.

The soybean balance for 2022/23 has also changed compared to July:

The global production forecast was increased by 1.39 million tons to 392.79 million tons (352.74 million in 2021/22 FY), in particular for the USA – by 0.69 to 123.3 (120.7) million tons, China – by 0.9 to 18.4 (16.4) million tons, which compensates for the decrease in the harvest in the EU by 0.43 to 2.57 (2.73) million tons.

The estimate of global soybean exports was increased by 0.2 million tons to 169.8 (153.15) million tons, in particular for the USA – to 58.65 (58.79) million tons.

The forecast of final reserves was increased by 1.8 million tons to 101.41 (89.7) million tons, in particular for the USA – by 0.4 to 6.66 (6.13) million tons, China – by 0.9 to 31 .46 (30.74) million tons. Analysts estimated reserves at 99.5 million tons, so the data of the report led to a decrease in quotations.

Quotations fell on the Chicago Stock Exchange on Monday:

November soybean futures – by 3% to $518.8/t (+5.2% for the month, -8.2% for two months);

December soybean oil futures – by 1.5% to $1,475/t (+9.8% for the month, -13% for two months).

The increase in oil production in China against the backdrop of low import rates in the previous season will put pressure on prices, so traders’ attention is focused on the country’s economy. If the situation does not improve, oil prices may fall sharply, especially given the significant amount of supply in the new season.

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