*****Surging Asian Demand For US Soybeans Will Have A Nasty Outcome*****

Wisconsin Ag Connection reports that Asian Demand for U.S. Soybeans Surges.

(emphasis mine) [my comment]

Asian Demand for U.S. Soybeans Surges
USAgNet - 10/20/2009

As farmers around the Midwest scramble to harvest their soybeans before potentially destructive weather strikes, forecasters are predicting a near-record soybean crop--and
Asia is waiting for it. In recent weeks, China and Taiwan have committed to purchasing huge loads of U.S. soybeans, boosting expectations that export sales will reach a new high. China alone bought $7.3 billion in U.S. soybeans in 2008 and is expected to nearly double that this year.

As of the beginning of this month, sales of soybeans to China soared to 12.5 million tons from last year's 7.7 million tons.

"They've come on stronger and stronger," said Bob Callanan of the American Soybean Association. "Half of the soybeans we grow in this country we export. ... Every fourth row we have is now going to China."

Huge economic growth in China over the past decade has lifted an estimated 200 million people into the middle class, transforming food consumption.
With more cash on hand, more Chinese are eating higher-priced foods, particularly meat from livestock raised on grains, usually a blend of soy and corn. Although China grows sufficient corn to feed growing demands for now, it requires soybean imports to feed its growing livestock industries. The country imports roughly two-thirds of its soybeans.

UPI.com reports that China is growing as buyer of soybeans.

China growing as buyer of soybeans
Published: Oct. 19, 2009 at 4:00 PM

CHICAGO, Oct. 19 (UPI) -- China's growing middle class has created a soaring demand for U.S. soybeans, giving farmers a steady consumer base, trade experts said.

"They've come on stronger and stronger. Half of the soybeans we grow in this country we export. ... Every fourth row we have is now going to China," Bob Callanan of the American Soybean Association told the St. Louise, Mo., Post-Dispatch.

About 200 million Chinese have joined the middle class in the past 10 years, creating a growing demand for meat, which comes from livestock feed a mixture of corn and soybeans, the newspaper said Monday.

"You're talking about a country with 1.3 billion people. If each person ate just one more portion of chicken or pork each week, that's a huge increase in demand," Callanan said.

"They're buying more than they normally would, and they're doing it earlier," said Darrel Good, an agricultural market specialist at the University of Illinois Urbana-Champaign.

My reaction: I have been predicting hyperinflation would start in China, leading to the dollar's collapse. Now it is happening. Chinese efforts to boost domestic consumption while maintaining supporting export with its dollar peg is creating enormous demand for raw materials. As a result, China is sucking up the world's supply of raw goods, putting massive upwards pressure on commodity prices, especially soybeans.

China's exploding money supply driving up demand

China's increasing supply of Yuan means that a lot more money is chasing its domestic supply of commodities. As a result, the prices of commodities in China are higher than the rest of the world, and this price imbalance is leading to record commodity imports (Chinese producers are buying commodities abroad rather than pay higher domestic prices).

Chinese Money Supply



Chinese Money Supply Growth



Chinese Money Supply Growth (6 month rolling average)




US Harvest Troubles Means Surging Asian Demand Will Have A Nasty Outcome

Nogger reports that
US Harvest Pace Is At A Crawl.

Tuesday, 20 October 2009
US Harvest Pace At A Crawl

It's official, this year's US harvest pace is comfortably the slowest in the last thirty years. The flip-side of benign and non-threatening weather all summer long, is a very late maturing cr op and combines rolling in the snow.

The USDA confirmed last night that
only 17% of the corn crop has been harvested so far, that is a quite astonishingly low just four point increase in a week. That's well behind the five year average of 46%, and five points lower than the previous slowest pace in the last thirty years of 22 percent on October 18, 1992. Illinois sees just 11% of the crop in the barn, compared to 68% normally.

For soybeans the harvest was 30% complete as of Sunday, only a seven point increase on last week and less than half the five year average of 72%. The previous slowest harvest pace in the last thirty years was 34 percent on October 18, 1985. In rain-sodden Illinois only 13% of the crop is in, compared to 79% normally.

Winter wheat plantings were 69% complete, compared to 78% normally, the USDA said. It's the soft red winter wheat states in the east that are particularly struggling. They need to get their beans cut before they can plant wheat. In Illinois wheat planting crawled from 12% complete last week to just 13% done as of Sunday. The five year average is 67%.

As to why the US harvest is going so slowly, Kfyrtv reports on North Dakota's wet weather woes.

Wet Weather Woes
Cliff Naylor
10/19/2009


[See Video]

North Dakota`s wet spring and summer is being followed by a wet and snowy fall.

Two snowstorms have already turned the ground in much of the state white, and while the early snows will melt before winter sets in, many farmers may not get row crops harvested before the seasons change again, unless Mother Nature provides them with some dry weather.

In North Dakota, it`s common to see autumn snow coat the state`s sunflower and corn crops, but acres and acres of soybeans covered in white is an unusual sight. October snowstorms have stopped many of the state`s combines right in their tracks, delaying the harvest of many late season crops.
...
Precipitation totals in some areas of North Dakota have already surpassed yearly averages, but farmers are more concerned about wet weather damaging the condition of the soybean crop than corn and sunflowers.
...

Some farmers need at least a week of continuous dry weather to get their combines moving again.
...
As of last week, only 17-percent of North Dakota`s soybeans were harvest. Normally by this time of year 68-percent of the crop would be combined.

My reaction: As of Sunday, the US soybean harvest was 30% complete, compared to the five year average of 72%. Considering the "acres and acres of soybeans covered in white", it is safe to assume that

1) Not all soybean fields will be harvested
2) There will be some damage to the soybeans which do get harvested.
3) 2009/10 will not see the record breaking soybean production which the USDA is predicting.


An insane amount of outstanding export sales for US soybeans

Below is a graph of total outstanding export sales for US soybeans going back ten years (data straight from the USDA's website). I highlighted in red the numbers that are worth noticing. Other things to consider when looking at this data:



1) The fact that outstanding export sales have accumulated to such a high level suggest that the US is completely out of high quality soybeans suitable for exports.

2) As of the second week of October, the US has exported 1.7 MMT (Million Metric Tons), which means that the US has already made 21.3 MMT of soybean export sales for 2009/10, compared to the 12.1 MMT sold as of the second week of October last year. This suggests that US soybean exports will be significantly higher than last year.


USDA estimates have NO CREDIBILITY

Below are the latest USDA estimates for soybean production, imports, and exports.

Thousand Metric Tons
Date Created 10/9/2009 8:44:57 AM

2006/07

2007/08

2008/09

2009/10

Production

United States

87,001

72,859

80,749

88,454

Brazil

59,000

61,000

57,000

62,000

Argentina

48,800

46,200

32,000

52,500

China

15,967

14,000

15,500

14,500

India

7,690

9,470

9,100

9,000

Paraguay

5,856

6,900

3,900

6,700

Canada

3,460

2,700

3,300

3,500

Other

9,337

8,004

9,090

9,413

Total

237,111

221,133

210,639

246,067

Imports

China

28,726

37,816

40,700

39,500

EU-27

15,291

15,123

13,000

12,400

Japan

4,094

4,014

3,450

3,950

Mexico

3,844

3,614

3,100

3,535

Taiwan

2,436

2,149

1,830

2,250

Thailand

1,532

1,753

1,500

1,705

Indonesia

1,309

1,147

1,200

1,600

Turkey

1,268

1,277

950

1,280

Egypt

1,328

1,061

1,200

1,230

Korea, South

1,231

1,232

1,130

1,200

Other

8,003

8,976

7,175

7,494

Total

69,062

78,162

75,235

76,144

Exports

United States

30,386

31,538

34,836

35,516

Brazil

23,485

25,364

29,986

23,650

Argentina

9,559

13,837

5,885

9,700

Paraguay

4,361

5,400

2,400

4,900

Canada

1,683

1,753

1,975

2,000

Other

1,836

1,627

1,845

2,085

Total

71,310

79,519

76,927

77,851


My reaction: Some of the glaring problems with these estimates for 2009/10:

1) The USDA expects the United States to harvest a record breaking 88.454 MMT (Million Metric Tons). With soybean fields buried in snow across the Midwest, this seems highly unlikely.

2) Despite predicting that Chinese soybean production will drop by 1 MMT in 2009/10 (from 15.5 MMT to 14.5 MMT), the USDA is also predicting China will import 1.2 MMT less (from 40.7 MMT to 39.5 MMT). That makes absolutely no sense! If Chinese demand for soybean is soaring (see above) and Chinese production is down, for what possible reason would the USDA predict China's soybean imports to be less in 2009/10?

3) India is suffering from the worst drought in over forty year (See *****Governments Lying About Looming Food Crisis*****), yet the USDA is expecting Indian soybean production to fall only 1% in 2009/10!

4) The USDA is predicting a 2% increase in soybean exports for 2009/10! In light of surging Asian demand for soybeans and the huge amount of export sales outstanding, predicting that the US will export only 35.5 MMT of soybeans is simply ridiculous.


Conclusion

The USDA's numbers don't add up. The world is headed towards the most serious food crisis seen in decades.

Even more catastrophic than the food shortage itself will be its effects on financial markets. The dollar's collapse will accelerate as nations around the world sell off their US reserves in an attempt to suppress out of control inflation. Backwardation and defaults will occur across the future markets as shortages and the falling dollar drive up price. As investors terrified of inflation flee the treasury market, The Fed will be forced to monetize the US enormous budget deficit to keep the government running, which will send the dollar into Zimbamwe-like hyperinflation. Finally, the US service sector (ie: most of the economy) will implode as American consumers loose all purchasing power. It will be a disaster.

Gold and agricultural land/commodities will be the best performers over the next year. This is why I am starting a fund to invest in Russian agricultural land. Please email me for more information.

This entry was posted in Currency_Collapse, Food_Crisis, Market_Skepticism, News_Developments. Bookmark the permalink.

One Response to *****Surging Asian Demand For US Soybeans Will Have A Nasty Outcome*****

  1. Anonymous says:

    Eric,
    Re: Chinese buying up our beans.

    I have read they are buying their domestic production and storing it. Buying US beans is a good way to dispose of dollars and get something that has real value.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>