Oil Crops Outlook: Soybean Acreage to Rise with Shift from Wheat, Corn

USDA’s Prospective Plantings report last month indicated that for the 2017/18 crop year, U.S. farmers intend to sow a record 89.5 million acres of soybeans, due to likely contractions in sown acreage for wheat, corn, and sorghum.

For 2016/17, data from USDA’s latest Grain Stocks report led to a lower forecast of the residual this month by 19 million bushels to 14 million. Seed demand for soybeans is 9 million bushels higher at 104 million based on the record planting intentions.

Given no other changes in soybean demand this month, 2016/17 ending stocks are expected 10 million bushels higher to 445 million.

Domestic Outlook

Intended New-Crop Soybean Acreage Swells to All-Time High

USDA’s Prospective Plantings report last month indicated that for the 2017/18 crop year, U.S. farmers intend to sow a record 89.5 million acres of soybeans. Acreage for soybeans may gain 6.1 million acres this year due to likely contractions in sown acreage for wheat, corn, and sorghum.

Prices for most crops are lower, but farmers anticipate a better outcome by growing soybeans. A market rally in early 2017 offered producers a fleeting opportunity to forward contract soybeans at prices more than $1 per bushel higher than a year earlier.

Nearly all States have higher intended 2017 acreage for soybeans but most of the year-to-year gains are accounted for by Kansas (up 950,000 acres), North Dakota (850,000), Minnesota (700,000), Iowa (600,000), and Nebraska (500,000). In contrast, wheat acreage in Nebraska is at its lowest level in recorded history, while in Kansas wheat is at a 60-year low.

Soybean planting has already begun in Arkansas, Louisiana, and Mississippi and should commence throughout the Midwest by early May.

For canola, U.S. farmers intend to plant a record 1.927 million acres in 2017–up 12 percent from last year. Oklahoma, Montana, and North Dakota account for a majority of the expected increase in 2017 canola acreage.

In the Northern Plains, higher acreage intentions for soybeans and canola this year are absorbing acreage reductions from other grain and oilseed crops. This includes a 9-percent decline for U.S. sunflowerseed planting intentions to 1.454 million acres.

Intended acreage for non-oil-type sunflowerseed is poised to rebound 65 percent (to 295,000 acres). However, this would be more than offset by a 259,000-acre reduction in oil-type acreage (to 1.159 million acres) that would shrink to its lowest level since 1976. Most of the change is attributed to a decline in North Dakota oil-type sunflowerseed acreage.

Current prices for oil-type sunflowerseed are down 10-15 percent from a year ago and are being pressured by a large old-crop inventory. March 2017 sunflowerseed stocks were at their highest level since 2006. Similarly, intended flaxseed acreage (another oilseed predominantly grown in North Dakota) is down 16 percent to 313,000 acres.

U.S. peanut acreage is expected to increase 5 percent (80,000 acres) in 2017/18 to 1.75 million acres. Producers in all States, excluding Texas and New Mexico, are planning to raise the area sown to peanuts. Market prices for peanuts in 2016/17 have been steadied by lower crop yields and a moderating level of stocks, which in February were down 18 percent compared to a year earlier. This spring, producers are responding to attractive new-crop contract prices of up to $500 per ton.

Market Prices Collapse With a More Ample Stocks Outlook

According to USDA’s latest Grain Stocks report, March 1 soybean stocks totaled 1.735 billion bushels. Old-crop inventories exceeded year-earlier level by 204 million bushels. This represents the highest March stocks since 2006/07–the year that set the all-time high for a season-ending soybean carryout. Stocks were higher than anticipated, however, based on total reported soybean use for the first half of 2016/17.

As a consequence, USDA lowered its forecast of the residual this month by 19 million bushels to 14 million. In contrast, seed demand for soybeans is 9 million bushels higher at 104 million based on record high planting intentions.

Given no other changes in soybean demand this month, 2016/17 ending stocks are expected 10 million bushels higher to 445 million. For soybean meal, a higher export forecast (up 300,000 short tons to 11.9 million) is offset by a reduction in domestic use (to 34 million tons).

An abundant old-crop stocks situation, improving South American crops, and a likely expansion of U.S. new-crop soybean acreage are now weighing heavily on market prices. After a January rally strengthened cash soybean prices to $10.00-$10.50 per bushel, they have retreated to their post-harvest lows near $9 per bushel. USDA revised its forecast of the 2016/17 average farm price to $9.40-$9.70 per bushel from $9.30-$9.90 last month.

Weaker bids by soybean crushers reflect deteriorating values for soybean meal and soybean oil. For soybean meal, the March average price in central Illinois fell to an 11-month low of $320 per short ton. As of early April, the prices are hovering just over $300 per ton. The 2016/17 average price is forecast down to $310-$330 per ton from $310-$340 last month on account of this downward trend.

Soybean oil demand has been weaker than anticipated, particularly for edible uses. Slower demand has led to rising stocks of soybean oil. At the end of October, soybean oil stocks totaled nearly 1.8 billion pounds but by February were just over 2.2 billion.

To reflect this trend, USDA lowered its 2016/17 forecast of soybean oil domestic use by 350 million pounds this month to 20.2 billion. All of the reduction in use is expected to accumulate in season-ending stocks, which are forecast rising to 2.122 billion pounds from 1.772 billion last month.

Prices of soybean oil are also plummeting. Since their December peak at 35.6 cents per pound, oil prices sank to a March average of 30.9 cents. Early April values have continued to slump toward 29 cents per pound. Thus, USDA’s forecast of the 2016/17 average price is lowered to 31-33 cents from 32-35 cents last month.

Full report.


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