Oil Crops Outlook: Record Acreage, Yields Swell U.S. Soybean Production

In its August Crop Production report, USDA confirmed the favorable impact of summer weather on soybeans with a U.S. average yield forecast for 2016/17 at 48.9 bushels per acre. The estimate of U.S. harvested acreage is unchanged at 83 million acres, so a higher yield boosts forecast soybean production to an all-time high 4.06 billion bushels.

Exports for 2016/17 are expected 30 million bushels higher this month to 1.95 billion. Demand by U.S. soybean crushers in 2016/17 is also forecast 15 million bushels higher to a record 1.94 billion bushels. Despite a reduction in beginning stocks and higher soybean demand, season-ending stocks for 2016/17 are forecast 40 million bushels higher this month to 330 million.

USDA forecasts the U.S. average farm price for 2016/17 at $8.35-$9.85 per bushel.

Domestic Outlook

Higher 2016/17 Soybean Crop Offsets a Lower Stocks Carryover

This summer, Midwestern soybean crops have benefited from nearly ideal soil moisture, with July rainfall for much of the region 25-75 percent above average. Major deficits of topsoil moisture in the region are absent except for in parts of Ohio, Michigan, and Arkansas. Overall, 72 percent of U.S. soybean acreage was rated in good-to-excellent condition as of August 7. Crop development this year is also slightly more advanced than usual, with 69 percent of soybeans forming pods, compared to the 5-year average of 61 percent.

In its August Crop Production report, USDA confirmed the favorable impact of summer weather on soybeans with a U.S. average yield forecast for 2016/17 at 48.9 bushels per acre. If realized, it would top last year’s all-time high yield of 48 bushels per acre, with records for Illinois, Iowa, Missouri, Nebraska, and Wisconsin. The estimate of U.S. harvested acreage is unchanged at 83 million acres, so a higher yield boosts forecast soybean production to an all-time high 4.06 billion bushels.

A larger soybean crop raises forecast total supplies this month by 86 million bushels, even with an outlook for lower beginning stocks. This month, season-ending soybean stocks for 2015/16 are forecast 95 million bushels lower to 255 million due to higher old-crop exports and domestic crush. Unprecedentedly strong shipments in July and August led USDA to raise its forecast of 2015/16 soybean exports to 1.88 billion bushels. An exceptionally robust finish may now push 2015/16 exports above last year’s record (1.842 billion).

A weakening dollar and a steep decline in exports from Brazil encouraged soybean importers (particularly in China and the EU) to switch back to U.S. shipments sooner than usual. Similarly, U.S. exports of soybean meal and soybean oil have been buoyed by tightening supplies of foreign exporters. The heavier-than-usual summer shipments of soybeans may help to spread out demand for U.S. storage and shipping capacity.

This fall, that infrastructure will likely be stressed when exports of the massive new crops of corn and soybeans quickly accelerate.

U.S. new-crop soybean demand will continue to excel with additional soybean supplies. Exports for 2016/17 are expected 30 million bushels higher this month to 1.95 billion. It could be the first year ever that U.S. soybean exports exceed the domestic crush. Even so, demand by U.S. soybean crushers in 2016/17 is also forecast higher–up 15 million bushels from last month to a record 1.94 billion bushels.

Better prospects for the crush are based on improved outlooks for domestic use of soybean meal (up 300,000 short tons to 34.1 million) and soybean meal exports (up 100,000 short tons to 12.3 million).

Despite a reduction in beginning stocks and higher soybean demand, season-ending stocks for 2016/17 are forecast 40 million bushels higher this month to 330 million. The highly favorable crop conditions and brightening yield prospects for both soybeans and corn pressured soybean prices throughout July and early August.

USDA forecasts the U.S. average farm price for 2016/17 at $8.35-$9.85 per bushel, compared to last month’s forecast at $8.75-$10.25 and a revised 2015/16 average at $8.95 per bushel. For soybean meal, a lower 2016/17 price range is seen, as well, which was forecast down to $305-$345 per short ton from $325-$365 last month. The forecast price range for soybean oil was unchanged at 29.5-32.5 cents per pound as lower 2016/17 beginning stocks offset an increase in production.

Season-Ending Peanut Stocks May Accumulate With a Record Supply

USDA forecasts peanut production for 2016/17 at 6.109 billion pounds. Due to a 2.3-percent decline in harvested area this year, this crop is forecast to decline slightly from last year to 6.211 billion pounds. However, peanut yields are expected up nearly 1 percent from last year to 3,990 pounds per acre. Most of the improvement stems from a likely recovery in yields for South Carolina and North Carolina–where crops last year were severely hurt by flooding. Total supplies in 2016/17 could swell nearly 1.1 billion pounds to 9.5 billion.

Peanut demand in 2016/17 may expand to a record level, as well. Domestic consumption of peanuts is seen higher while exports may plateau around this year’s record high. Despite demand growth, season-ending stocks for 2016/17 are forecast rising to a record 3.4 billion pounds, given a huge supply increase.

For 2015/16, U.S. peanut exports are forecast at a record high 1.5 billion pounds, up 100 million from last month. Import growth by China and Vietnam is leading the surge in U.S. peanut exports. In addition, domestic peanut consumption for 2015/16 has also continued to rise, with domestic food use forecast up 111 million pounds from last year to 3.1 billion.

Although expectations for exports and domestic food use are higher, total domestic use of peanuts may decline on account of a large reduction for the residual component of the balance sheet. As a result, the season-ending stocks forecast is raised 711 million pounds from last month to 3.3 billion.

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