We believe that the falling soybean oil (SBO) spread is likely to bring down overall soy spread in 2H22-23 despite the less negative spread for soybean meal (SBM) due to the strong SBM demand for raising livestock. Hence, weaker SBO margin will bring down overall crushing margin in 2023. Due to both negative and positive factors for soybean (SB) in 2H22-2023—higher La Niña in 2H22, weaker US SB sales and anticipated global economic slowdown—the global SB price is likely to move sideways in a $13-15/bushel range. We reiterate a HOLD on TVO for a decent dividend yield.
Weaker US soybean export sales in Sep 2022
Based on USDA’s US export sales report on Sep 15, the US SB net sales were 446.4k tonnes during Sep 9-15, 2022, down 47% WoW from 843k tonnes during Sep 2-8 and down 70% from 1.47m tonnes during Aug 26-Sep 1. Specifically, the US soybean sales to China alone were 152.5k tonnes during Sep 9-15, down 65% WoW from 441.7k tonnes during Sep 2-8 and down 78% from 692.6k tonnes during Aug 26-Sep 1. We believe that the stronger USD currency as a result of several interest rate hikes has undermined the competitiveness of US SB exports and weakened demand. In light of this, there is a downside risk to the 2022/23 US SB export estimate.