February 1, 2018 / 11:38 PM / 6 months ago

U.S. soy exports hit seven-month low on quality woes, competition

CHICAGO (Reuters) - U.S. soybean export sales fell to a seven-month low last week, according to government data released on Thursday, as stiff competition from rival exporter Brazil and concerns over lower U.S. crop quality dented demand from key buyers such as China.

The poor weekly sales tally has raised concerns that overseas shipments could contract further than expected, sending futures prices down sharply at the Chicago Board of Trade.

Even before the new data release, annual exports were expected to decline for the first time in five years.

Reduced exports could result in an even larger stockpile of U.S. soybeans, which could heap more pain on the slumping agricultural economy as farm incomes and crop prices languish for a fifth straight year.

Stockpiles left from the previous crop ahead of the next harvest are already forecast at 12.8 million tonnes, the largest in 11 years, according to the U.S. Department of Agriculture. The agency is due to update its supply and demand estimates next Thursday in a monthly report.

Net U.S. soybean export sales in the week ended Jan. 25 fell to a season-low 359,014 tonnes for shipment in the 2017/18 (Sept/Aug) marketing year, according to the USDA, below average trade estimates for at least 600,000 tonnes.

Combined with 50,710 tonnes in new-crop sales, the week’s tally was the lowest since mid-June. [EXP/SOY] [USDA/EST]

“Brazil is very competitive in the price. Even with the lower dollar, they’ve been able to keep people interested in their beans,” said Jack Scoville, analyst with Price Futures Group.

“And there have been some quality concerns with U.S. beans this year. The protein level isn’t quite where they want it... That’s probably had people shying away from buying U.S. soybeans as well,” he said.

Average protein content of U.S. soybeans fell to a record low this season as the race to grow ever-larger crops has robbed the crop of the prized nutrient. That has allowed Brazil, which produces higher-protein beans, to seize market share in top importer China.

Near term Brazilian soybean shipments are offered at around $388 per tonne, a $5 to $10 premium over U.S. Gulf shipments, according to traders. But many buyers are willing to pay those premiums for the higher quality Brazilian beans.

Tighter Chinese import specifications on foreign matter (FM) allowed in soy cargoes has also created headwinds for U.S. shipments, traders said. China’s recent concerns have been about weed seeds in soy shipments, but foreign matter can also include dust, insects and pebbles that are picked up during harvest and loading.

“The one-percent FM has resulted in more demand going to Brazil. We don’t always meet that spec so we’ve lost business there. And Brazil has just had old-crop supplies available at a competitive price,” said DC Analysis President Dan Cekander.

Reporting by Karl Plume in Chicago; Editing by Simon Webb and Phil Berlowitz

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