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Oil Crops Outlook: Export Competition Suppresses Expansion of U.S. Soybean Sales

Ernst Undesser
From USDA November 17, 2017

Oil Crops Outlook: Export Competition Suppresses Expansion of U.S. Soybean Sales

USDA’s November Crop Production report forecasts the 2017/18 yield for soybeans at 49.5 bushels, down slightly from last month. The estimate of U.S. harvested area is unchanged at 89.5 million acres, so the yield reduction trims the 2017/18 forecast of the soybean crop by 5 million bushels to 4.425 billion.

The forecast of the 2017/18 domestic crush is also unchanged, so this month’s entire production decline for soybeans results in a lower seasonending stocks forecast at 425 million bushels.

Based on current price levels for crop marketing, the outlook for the U.S. season-average farm price is seen slightly higher at $8.45-$10.15 per bushel.

Domestic Outlook

Negligibly Lower Soybean Yield Shaves 2017/18 Stocks Outlook

USDA’s November Crop Production report forecasts the 2017/18 yield for soybeans at 49.5 bushels, down slightly from last month. Yield reductions this month for Michigan, North Dakota, Kansas, and Ohio are almost completely offset by increases in Illinois, Nebraska, and the Southeast region.

The estimate of U.S. harvested area is unchanged at 89.5 million acres, so the yield reduction trims the 2017/18 forecast of the soybean crop by 5 million bushels to 4.425 billion. As of November 5, 90 percent of the U.S. soybean harvest had been completed, slightly behind the 5-year average of 91 percent.

Supported by a record soybean supply, U.S. export shipments have started briskly for September-October 2017. Even so, soybean shipments lag last year’s pace. USDA left its forecast of 2017/18 exports unchanged this month at 2.25 billion bushels. U.S. export demand this fall is being restrained by more competition from Brazil, where disposal of large inventories from the country’s bumper 2016/17 harvest is still proceeding.

Compared to a year ago, U.S. export sales this fall are not as robust, either. As of November 2, export sales commitments of soybeans were 15 percent lower than a year earlier. Any subsequent revival of these sales may depend on how long prices can stay aloft amid an abundance of domestic stocks. Until the size of new-crop harvests in South America are better defined, however, soybean prices are unlikely to succumb to pressure right away.

By January 2018, a slower seasonal decline in U.S. exports could be facilitated by a slightly later and smaller new-crop harvest in Brazil. After that, price competitiveness will determine global shares of the export market.

The forecast of the 2017/18 domestic crush is also unchanged, so this month’s entire production decline for soybeans results in a lower season-ending stocks forecast at 425 million bushels.

Based on current prices for crop marketing, the outlook for the U.S. season-average farm price is seen slightly higher at $8.45-$10.15 per bushel—up 10 cents from last month. For September, the U.S. average soybean price received by farmers was $9.35 per bushel. Cash prices in October stayed steady throughout the country.

A record September crush left an unusually high level of month-ending soybean meal stocks. Assuming a reduction next year for these pipeline stocks of meal to a more typical level, a modest strengthening in domestic disappearance is anticipated.

Domestic soybean meal use for 2017/18 is forecast 100,000 short tons higher this month to 34.3 million. Prices for soybean meal this season may hover at a slightly higher level of $295-$335 per short ton.

Likewise, the higher September crush led to more output and ending stocks of soybean oil than anticipated last month. This larger carryover raised the 2017/18 forecast of soybean oil ending stocks by 79 million pounds to 1.616 billion. Soybean oil prices for 2017/18 are forecast unchanged at 32.5-36.5 cents per pound.

Production Estimate for Peanuts Revised Down but Still a Record

The U.S. peanut crop for 2017/18 was revised down 2 percent in the November Crop Production report to 7.64 billion pounds based on slightly lower yields. Georgia, Alabama, and Florida account for most of this month’s crop reduction.

The downward revision to 4,176 pounds per acre demotes the yield to the second-highest ever after 2012/13 (4,211 pounds). Moderation of this supply may temper the expected increase in season-ending stocks to 2.55 billion pounds from 1.44 billion in 2016/17. Harvesting of the peanut crop was 82 percent complete as of November 5.

Full report.

Ernst Undesser
From USDA November 17, 2017