Oil Crops Outlook: Lackluster Soy Meal Exports To Slow Soybean Crushing
U.S. season-ending soybean stocks for 2015/16 are forecast 10 million bushels higher this month to 450 million–a 9-year high. The increase was precipitated by a lower forecast (down 10 million bushels) of the soybean crush, now forecast at 1.88 billion bushels. This month, USDA lowered its forecast of 2015/16 soybean meal exports by 500,000 short tons to 11.2 million due to slowing export sales commitments.
Soybean Crushing Outlook Dims With Slide in Soybean Meal Prices
U.S. season-ending soybean stocks for 2015/16 are forecast 10 million bushels higher this month to 450 million. If realized, this season’s expected closing inventory would be the highest since the 2006/07 carryout of 574 million bushels. The increase was precipitated by a lower forecast (down 10 million bushels) of the 2015/16 soybean crush, now forecast at 1.88 billion bushels.
Despite record high December 1 soybean stocks, the December soybean crush was at a 4-year low (yet slightly higher than November). Over the next 6-8 months, cash crush margins may deteriorate further and soften demand by soybean processors.
Weakening demand for soybean meal, particularly in the export market, is the primary reason for dimmer crushing prospects. This month, USDA lowered its forecast of 2015/16 soybean meal exports by 500,000 short tons to 11.2 million. January export shipments of soybean meal lagged further behind a year ago while new sales slumped. U.S. sales of soybean meal, particularly to the European Union and Southeast Asia, have been eroded by a strong dollar and impending competition from Argentine exports.
The declining value of soybean meal reflects this outlook. In January, central Illinois soybean meal prices fell below $280 per short ton for the first time in nearly 6 years and were down from the December average of $290. The 2015/16 average price is forecast unchanged, however, at $270-$310 per short ton.
In contrast, soybean oil prices have generally strengthened since last fall. Accordingly, this has swelled the share of soybean oil this season in the total crush value for soybeans. But in January, the overall trend in the cash crush margin for soybeans was exacerbated by a price decline for soybean oil (to 28.9 cents per pound from 29.7 cents in December).
With this month’s lower forecast crush, soybean oil production is expected to be scaled back, which more than offsets a higher oil extraction rate. U.S. soybean oil demand is forecast unchanged, so 2015/16 ending stocks are seen lower at 2.065 billion pounds (compared to 2.11 billion last month). Despite the January decline, the season-average price for soybean oil is expected to stay within the range of 28.5-31.5 cents per pound.
The bulls were again winners in an exciting week for longs and producers. In last week’s report, I said the markets bias would be near unchanged to a bit lower.