Oil Crops Outlook: Export Related Price Strength Spurs Soybean Planting

Last month, USDA’s Acreage report indicated that U.S. sown acreage of soybeans in 2016/17 is a record 83.7 million acres. USDA raised its forecast of soybean production for 2016/17 to 3.88 billion bushels based on a harvested area estimate of 83 million acres and a trend yield of 46.7 bushels per acre. With a higher supply outlook, new-crop exports are forecast 20 million bushels higher this month to a record 1.92 billion bushels.

Likewise, the domestic soybean crush in 2016/17 is seen 10 million bushels higher to 1.925 billion. Season-ending soybean stocks for 2016/17 are forecast 30 million bushels higher this month to 290 million. The U.S. season-average farm price is forecast unchanged at $8.75-$10.25 per bushel.

Domestic Outlook

Spring Price Rally Inspires Record U.S. Soybean Acreage in 2016/17

Last month, USDA’s Acreage report indicated that U.S. sown acreage of soybeans in 2016/17 is a record 83.7 million acres. Compared to farmers’ soybean planting intentions in March, sown acreage is 1.45 million acres higher. This year’s expansion of soybean acreage was encouraged by an auspicious increase in prices prior to spring planting.

Cash soybean prices swelled nearly $2.50 per bushel between March and June—one of the strongest rallies ever for this period. Also, generally favorable planting conditions lasted into June throughout the country. Total field crop acreage has rebounded, as well, with minimal acreage left unsown this spring due to excessively wet soils.

All-time highs for sown soybean acreage were set this year in Minnesota, North Dakota, Ohio, Michigan, and Wisconsin. In contrast, soybean planting in the South declined due to a recovery in cotton and rice acreage.

Soybean crop development is proceeding well after a mostly trouble-free planting campaign. As of July 11, 40 percent of soybean acreage had started blooming, compared to the 5-year average of 31 percent. Throughout the Midwest, soil moisture conditions are now adequate for supporting crop development, with 71 percent of the crop currently rated in good-to-excellent condition.
USDA forecasts soybean production for 2016/17 at 3.88 billion bushels based on a harvested area estimate of 83 million acres and a trend yield of 46.7 bushels per acre.

The current crop forecast is 80 million bushels above last month’s forecast and only 49 million below last year’s record. Adding this forecast production to a likely ample September 1 stocks carryover raises total expected soybean supplies for 2016/17 to an all-time high 4.26 billion bushels.

An increase in soybean supplies should further encourage 2016/17 demand. New-crop exports are forecast 20 million bushels higher this month to a record 1.92 billion bushels. Likewise, the domestic soybean crush in 2016/17 is seen 10 million bushels higher to 1.925 billion. More crushing could be prompted by brightening export prospects for soybean meal (seen 200,000 tons higher this month to 12.2 million short tons).

However, the increases in demand may not expand by as much as the expected production gains, so season-ending stocks for 2016/17 are forecast 30 million bushels higher this month to 290 million. The U.S. season-average farm price is forecast unchanged at $8.75-$10.25 per bushel.

Late Surge in 2015/16 U.S. Export Sales of Soybeans To Trim Stocks

A key contributor to the recent increase in the soybean price is reinvigorated U.S. export sales for 2015/16. This month, USDA raised its forecast of 2015/16 soybean exports by 35 million bushels to 1.795 billion. Over the past 6 weeks, soybean importers have been encouraged to seek more U.S. purchases for near-term delivery with the slowdown in export shipments from Brazil.

Grain Commentary


As of June 30, outstanding export sales were 266 million bushels—by far the highest ever at this stage of the crop marketing year. In fact, total export commitments now exceed last year’s peak. Nevertheless, it seems unlikely that all of these soybean sales will get shipped by the end of August. Of these outstanding sales, 62 percent are to unknown destinations.

Provided that summer growing conditions do not signal a sharp deterioration of yields, deliveries for many of these sales commitments could be deferred to 2016/17.

According to last month’s Grain Stocks report, U.S. soybean stocks as of June 1 totaled 869.9 million bushels, up 39 percent from a year earlier and a 9-year high. The abundant remaining inventory is primarily related to the large supply at the start of the crop year and not a result of poor demand. Total use of soybeans through the first three quarters of 2015/16 surpasses all but 2014/15 totals. The cumulative soybean crush for September 2015-May 2016 (1.438 billion bushels) is a record pace.

Cumulative exports through May trail the record pace of a year earlier by 79 million bushels, at 1.648 billion bushels. However, that gap versus last year could narrow in the final quarter. Despite robust soybean use, June stocks were higher than anticipated and led USDA to forecast residual use down this month by 20 million bushels.

With this month’s forecasts for higher exports, lower imports, and no change in crush, season-ending stocks for 2015/16 are seen 20 million bushels lower to 350 million.

For soybean oil, USDA raised its 2015/16 export forecast this month by 100 million pounds to 2.3 billion. Sharply higher export sales in May and June prompted an increase in the forecast. The consumption gains for soybean oil used in biodiesel this year—while ahead of last year’s pace—have not been as large as anticipated.

Processing margins for biodiesel producers are improving, but the largest monthly production volumes may not be seen until the last quarter of 2016. For 2015/16, October-September consumption for biodiesel is expected 150 million pounds lower to 5.35 billion, while 2016/17 consumption is forecast 150 million pounds higher at 5.95 billion.

Despite steady use, soybean oil stocks in May edged up as monthly production has set record highs since February. Coupled with favorable new-crop soybean prospects and an emerging recovery in global palm oil production, soybean oil prices have been pressured. Season-average prices for soybean oil are forecast down this month to 29.5 cents per pound for 2015/16 and 29.5-32.5 cents for 2016/17.

U.S. Sunflowerseed and Canola Acres Are Down This Year

In the Northern Plains, more attractive returns for corn and soybeans this year generally constrained the planting of minor oilseed crops. For sunflowerseed, the June Acreage report indicated the area sown in 2016/17 was 1.645 million acres. This is a minimal reduction from the March Prospective Plantings report but down 11.5 percent from 2015/16.

Likewise, canola planted area slipped 2 percent from the March intentions to 1.7 million acres, down 4 percent from 2015/16. Expected production for both crops is marginally lower. Also, flaxseed acreage declined 48,000 acres from farmers’ March intentions to 342,000 acres, which is down 26 percent from the 2015/16 marketing year.

Growing Export Demand for U.S. Peanuts Is Shrinking the Stocks Surplus

U.S. peanut production for 2016/17 is forecast up to 6.1 billion pounds from 5.8 billion last month based on higher sown acreage from the June report. Peanut area increased to 1.56 million acres, compared to the March intentions for 1.48 million acres, still down 4 percent from 2015/16 planted area. However, the gain in total supplies for 2016/17 may be minimal on account of a lower forecast stock carryover.

Peanut ending stocks for 2015/16 are forecast down this month due to higher forecasts of domestic consumption (3.1 billion pounds) and exports. If realized, U.S. peanut exports for 2015/16 will be a record 1.4 billion pounds. Higher peanut exports are in part due to China’s increased consumption and imports of peanuts.

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