Source: lujiazui bulk commodities BBS

【Investment point】

In July, the USDA monthly supply and demand report reduced the total area planted and harvested, unit yield, total output, ending inventory and inventory consumption ratio of U.S. soybeans for 209/20, thereby reducing global soybean production, ending inventory and inventory consumption ratio for 209/20.

In our view, the USDA adjustment to the soybean balance sheet itself has a positive impact, which would have been overwhelmingly positive in previous years (before the trade friction between the United States and China), often leading to significant price spikes. U.S. bean prices have risen only slightly this year, largely because of worries about trade friction with China. For the domestic market, the current trading focus is also on demand concerns, the recent outbreak of African swine fever in two lakes and other regions makes the market again trade the logic of "weak demand".

Overall, we are not pessimistic about the beans market, given the potential for a significant contraction on the supply side, and expect there to be limited room below prices.For domestic beans, the focus is on stabilizing or improving demand. As for us beans, in addition to sino-us trade issues, the weather conditions in the key growing season of us beans are mainly concerned.

August USDA monthly supply and demand report released at midnight Beijing time on August 13. We will make an analysis based on the latest situation.

We are interpreting the latest Estimates on global soybean Supply andDemand released by the us department of agriculture at midnight on July 12, 2019.

1. July USDA monthly supply and demand report (beans) adjustment

1.1Soybean balance sheet: global soybean production, inventory, inventory consumption ratio and other large downward impact much

The July 2019 world agricultural supply and demand report (WASDE) has adjusted the key items of the new global and major country soybean balance sheet for 2019/20 as follows:

1、Production: global soybean production is estimated at 347.04 million tons, down 8.35 million tons from June. Among them, the U.S. soybean output was 104.64 million tons, down 8.31 million tons from June and down 19.2 million tons from 2018/19. There was no adjustment in soybean production in major producers such as Brazil, Argentina and China. The big drop in U.S. soybean production was largely due to lower acreage and yield per unit area: 80 million acres in 2019 was projected in the July report, down from 84.6 million acres in the June USDA supply and demand report, and essentially unchanged from 80.4 million acres in the USDA's intention report at the end of June. The 2019 harvest was 79.3 million acres, also below the 83.8 million acres forecast in the June USDA supply and demand report and essentially unchanged from the 79.26 million acres forecast in the USDA's end-june intention report. In addition, the July USDA supply and demand report projected a yield of 48.5 cattles per acre in 2019, down from 49.5 cattles per acre in June.

2、Consumption: global soybean consumption was 355.06 million tons, 250,000 tons lower than the estimate in June. Soybean consumption in the United States, Brazil, Argentina and China was unchanged from June estimates.

3、Exports: global soybean exports were 1512.6 million tons, up 210,000 tons from June estimates. Among them, the U.S. soybean export was 51.03 million tons, down 2.04 million tons from June's estimate, Brazil's soybean export was increased by 1 million tons to 76 million tons, and Argentina's soybean export was increased by 1 million tons to 8 million tons. As a result, the adjustment still reflects the impact of trade friction between China and the United States, the United States soybean exports down and Brazil and Argentina soybean exports up.

4、Ending inventory: global ending inventory of 104.53 million tons, 8.13 million tons lower than the estimate in June. Among them, the us cut 6.82 million tons to 21.63 million tons, Brazil cut 250,000 tons to 27.45 million tons, Argentina cut 1 million tons to 26.2 million tons, and China kept 21.37 million tons unchanged. Therefore, the sharp decline of global soybean ending stocks this time is mainly caused by the sharp decline of us soybean ending stocks.

5、Inventory consumption ratio: global soybean inventory consumption ratio was 29.44%, down 2.27% from June estimates and 3.06% from 2018/19. Among the world's major soybean producers and consumers, the U.S. saw a sharp reduction in the ratio of soybean stocks to consumption, from 46.57 percent in June to 35.41 percent now.

1.2Soybean meal balance sheet: 209/20 production, inventory, and inventory consumption ratio are all reduced with positive impact

The July USDA supply and demand report lowered key data for 2019/20 on global soybean meal initial stocks, production, ending stocks and inventory-to-consumption ratios, which had a positive impact.Among the major producers and consumers in the world, the ending inventory and inventory consumption ratio of Argentine soybean meal were both reduced. The ending inventory of Argentine soybean meal in 2019/20 was 2.89 million tons, 250,000 tons lower than the estimate in June. Argentina's soybean meal inventory consumption ratio was 87.58 percent, down 7.57 percent from June estimates.

1.3Soybean oil balance sheet: 2019/20 ending inventory and inventory consumption ratio slightly upward impact slightly short

In July, the USDA supply and demand report slightly reduced global soybean oil production in 2019/2020, but the demand also decreased, thus ending inventory and inventory consumption ratio increased slightly, the impact was slightly negative.Global ending stocks of soybean oil in 2019/20 totaled 3.57 million tons, up 50,000 tons from June and down 60,000 tons from 2018/19. Among the world's leading producers, Brazil's soyoil ending stocks were slightly increased by 20,000 tons to 340,000 tons, Argentina's by 50,000 tons to 390,000 tons, and the us, China and India's ended stocks were unchanged. Global soybean oil inventory consumption in 2019/20 was 6.25 percent, up 0.12 percent from the June forecast and down 0.26 percent from 2018/19. The adjustment was mainly made by Brazil and Argentina: Brazilian soybean oil ending inventory consumption increased by 0.28% from June to 4.72%. Argentina's ending stocks of soyoil were 13.73 per cent higher than in June, up 2.9 per cent, while the ratio of consumption of soyoil stocks in the us, China and India was unchanged.

2. The report reviews

In July, the USDA monthly supply and demand report reduced the total area planted and harvested, unit yield, total output, ending inventory and inventory consumption ratio of U.S. soybeans for 209/20, thereby reducing global soybean production, ending inventory and inventory consumption ratio for 209/20.

In our view, the USDA adjustment to the soybean balance sheet itself has a positive impact, which would have been overwhelmingly positive in previous years (before the trade friction between the United States and China), often leading to significant price spikes. U.S. bean prices have risen only slightly this year, largely because of worries about trade friction with China. For the domestic market, the current trading focus is also on demand concerns, the recent outbreak of African swine fever in two lakes and other regions makes the market again trade the logic of "weak demand".

Overall, we are not pessimistic about the beans market, given the potential for a significant contraction on the supply side, and expect there to be limited room below prices.For domestic beans, the focus is on stabilizing or improving demand. As for us beans, in addition to sino-us trade issues, the weather conditions in the key growing season of us beans are mainly concerned.

August USDA monthly supply and demand report released at midnight Beijing time, we will make an analysis based on the latest situation.