Oil Crops Outlook: U.S. Soybean Exports To Benefit From Record Harvest

In the October Crop Production report, USDA raised its 2016/17 forecast of the U.S. average soybean yield to a record 51.4 bushels per acre compared to 50.6 bushels last month. Coupled with a harvested acreage estimate of 83 million acres, the higher yield boosts forecast soybean production this month by 68 million bushels to 4.269 billion.

USDA forecasts soybean exports for 2016/17 at 2.025 billion bushels, up 40 million from last month’s forecast. Domestic use of soybeans is forecast unchanged. Despite a better export outlook, the larger crop raises the forecast of 2016/17 season-ending stocks this month by 30 million bushels to 395 million.

Domestic Outlook

Mammoth 2016/17 Soybean Crop To Accommodate Robust Demand

In the October Crop Production report, USDA raised its 2016/17 forecast of the U.S. average soybean yield to a record 51.4 bushels per acre compared to 50.6 bushels last month. Coupled with a harvested acreage estimate of 83 million acres, the higher yield boosts forecast soybean production this month by 68 million bushels to 4.269 billion.

The largest production gains this month are due to higher acreage and yield indications for North Dakota, South Dakota, and Illinois. These increases more than offset reductions in acreage and production for Minnesota, Iowa, and Tennessee.

In some parts of the Midwest–particularly Iowa, Minnesota, and Wisconsin–heavy rainfall interrupted harvesting in September. Overall, however, the harvest delays are minor. As of October 9, the U.S. soybean crop was 44 percent harvested compared to the 5-year average of 47 percent.

Total soybean supplies for 2016/17 are 70 million bushels higher this month based on the larger crop and beginning stocks. Last month, USDA’s Grain Stocks report pegged September 1 soybean stocks at 197 million bushels–2 million higher than last month’s 2015/16 forecast and up from 191 million in 2014/15. Although the 2015/16 soybean supply expanded by 88 million bushels, season-ending stocks were only marginally higher due to a strong finish for demand in the summer quarter.

June-August 2016 soybean demand totaled 680 million bushels. This was a fourth-quarter record for soybean use and–for the first time ever–surpassed third-quarter demand (664 million bushels). The data also implied a smaller soybean production estimate for 2015/16, which was revised down by 3 million bushels to 3.926 billion.

In September, U.S. soybean exports for 2016/17 got off to a fast start as export inspections were record-high for the month at 133 million bushels. USDA forecasts total shipments for the whole season at 2.025 billion bushels, up 40 million from last month’s forecast. Domestic use of soybeans is forecast unchanged.

Despite a better export outlook, the larger crop raises the forecast of 2016/17 season-ending stocks this month by 30 million bushels to 395 million. If realized, the inventory would be a 10-year high. Price forecasts in 2016/17 for soybeans, soybean meal, and soybean oil are unchanged.

Larger U.S. Canola Supplies To Expand Use as Sunflowerseed Supplies Tighten

U.S. canola production for 2016/17 is forecast at a record 2.99 billion pounds. Area planted is down 4 percent from 2015/16 to 1.7 million acres. Countering the lower acreage is a forecast increase in the canola yield to 1,768 pounds per acre, which would be the second-highest on record.

North Dakota accounts for nearly all of the production gain as an increase in acreage and excellent yields there offset crop declines in Oklahoma and Montana.

The abundant U.S. and Canadian crops in 2016/17 are anticipated to strengthen crush demand for canola. The domestic crush is forecast at a record 4 billion pounds compared to 3.4 billion in 2015/16. U.S. canola imports for 2016/17 may increase sharply to 1.4 billion pounds from 780 million last year.

Imports are already off to a strong start for the crop year, with June-August 2016 trade up 68 percent from a year earlier.

For sunflowerseed, USDA forecasts new-crop production to decline 16 percent from a year ago to 2.46 billion pounds due to lower sown acreage and yields. Sunflowerseed area planted this year is estimated at 1.6 million acres–the fourth-lowest on record since 1976.

With the sunflowerseed harvest now proceeding in the Northern Plains, the 2016/17 national average yield is forecast at 1,596 pounds per acre, modestly below last year’s record 1,625 pounds. Most of this season’s crop reduction is concentrated in South Dakota, where acreage fell 18 percent from last year and expected yields are down 10 percent.

As a consequence, North Dakota will reclaim the top ranking for sunflowerseed production with a more modest decline in acreage and a higher yield.

While this year’s U.S. sunflowerseed crop is 465 million pounds below the 2015/16 harvest, the impact on total supplies is tempered by large carryover stocks. On September 1, beginning stocks of sunflowerseed for 2016/17 totaled a 7-year high at 414 million pounds, swelling 74 percent from a year earlier.

Oil-type sunflowerseed accounted for 57 percent of this total inventory. As a consequence, a comparatively small reduction in total oil-type supplies for 2016/17 could then support sunflowerseed crushing at 1.3 billion pounds (versus 1.14 billion in 2015/16) provided these stocks are drawn down.

USDA Forecasts Second-Highest U.S. Peanut Production

USDA lowered its forecast of 2016/17 U.S. peanut production this month by 108 million pounds to 6.31 billion. The reduction was primarily related to lower expected yields in Georgia. Even with this decline, this year’s peanut crop is expected to be the second-highest on record. U.S. new-crop peanut exports are forecast unchanged this month at 1.5 billion pounds.

August 2016 exports were a monthly record. The forecast for 2016/17 total use of peanuts is nearly unchanged from last month, so the lower crop is expected to trim season-ending stocks to 2.078 billion pounds. Yet, ending stocks may still exceed the 2015/16 carryout by as much as 16 percent.

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