Oil Crops Outlook: Surplus of U.S. Soybean Stocks May Grow in 2017/18

Despite higher acreage, U.S. production of soybeans in 2017/18 would slip to 4.255 billion bushels from 4.307 billion in 2016/17 based on a reduction in yields from last year’s record. The combination of this output with unusually large carryover stocks would result in a record 4.7-billion-bushel supply.

Abundant supplies could propel U.S. soybean exports for 2017/18 to an all-time high 2.15 billion bushels, well above the revised 2016/17 forecast of 2.05 billion. U.S. processors may raise the 2017/18 soybean crush by 25 million bushels to 1.95 billion on account of higher domestic and export demand for soybean meal.

Compared to the 435 million bushels expected at the end of 2016/17, USDA forecasts season-ending soybean stocks for 2017/18 at 480 million bushels. USDA forecasts the 2017/18 U.S. average farm price for soybeans at $8.30-$10.30 per bushel compared to $9.55 in 2016/17.

Domestic Outlook

U.S. Soybean Output May Decline if a Lower Yield Offsets Record Area

U.S. planting intentions for soybeans are at a record 89.5 million acres this year. Recent wetness in parts of the Midwest has slowed soybean planting, which was 14 percent complete as of May 7. Despite an impending surge in acreage, the 2017/18 soybean crop may fall moderately on account of a decline from last year’s stellar yields.

A trend soybean yield for 2017/18 is estimated at 48 bushels per acre, down from the actual 2016/17 yield of 52.1 bushels. U.S. new-crop production would then slip to 4.255 billion bushels from 4.307 billion in 2016/17.

Nonetheless, the 2017/18 crop would be the second-largest on record by a wide margin. The combination of this output with unusually large carryover stocks would result in a record 4.7-billion-bushel supply.

Abundant supplies could propel U.S. soybean exports for 2017/18 to an all-time high 2.15 billion bushels, well above the revised 2016/17 forecast of 2.05 billion. A smaller increase is expected for domestic soybean demand.

U.S. processors may raise the 2017/18 soybean crush by 25 million bushels to 1.95 billion. Domestic livestock feeders are forecast to consume 2 percent more soybean meal in 2017/18, at 34.2 million short tons.

Competitive prices will similarly encourage U.S. soybean meal exports, although robust foreign competition could limit trade to 12.4 million short tons from 12.1 million in 2016/17.

Soybean stocks may continue to accumulate in 2017/18. A large increase in beginning stocks may more than offset a combination of higher use and lower production. Compared to the 435 million bushels expected at the end of 2016/17, USDA forecasts season-ending soybean stocks for 2017/18 at 480 million bushels.

Cash soybean prices should remain under pressure throughout 2017/18 provided that crops around the world develop normally.

USDA forecasts the 2017/18 U.S. average farm price for soybeans at $8.30-$10.30 per bushel versus $9.55 in 2016/17. Likewise, soybean meal prices in 2017/18 will stay level at $295-$335 per short ton.

Soybean Oil Demand Hinges on the Outlook for Biodiesel

In 2017/18, the future of biodiesel imports may largely determine prospects for the use of domestically produced soybean oil. An anti-dumping case was filed in April with the U.S. International Trade Commission (ITC) and Commerce Department to investigate whether biodiesel imports from Argentina and Indonesia are unfairly subsidized and injuring domestic producers.

U.S. imports of biodiesel more than doubled in 2016 and accounted for 29 percent of total domestic consumption. On May 5, ITC ruled affirmatively on the case, putting into motion this summer a determination by the Commerce Department of preliminary anti-dumping and countervailing duties on imports from these countries.

Since January, U.S. biodiesel imports have already slowed after expiration of the blending tax credit, but any new import duties could indefinitely shift the onus of fulfilling renewable fuels mandates onto domestic producers.

Until those duties are known, USDA projects 2017/18 consumption of soybean oil for biodiesel at 6.45 billion pounds, compared to 6.2 billion in 2016/17. Total domestic disappearance of soybean oil is forecast rising to 20.45 billion pounds in 2017/18 from 20 billion for the current marketing year.

Only a modest increase is anticipated for the food use of soybean oil as market growth is shared with canola oil, cottonseed oil, and palm oil.

The availability of soybean oil supplies not consumed domestically will help frame the potential of the export market. The level of export competition from Argentina could also be altered depending on developments for its biodiesel trade. U.S. soybean oil exports in 2017/18 are seen steady at 2.3 billion pounds.

An expected surge in global vegetable oil production–particularly by palm oil– will apply pressure on soybean oil prices in 2017/18. USDA forecasts the seasonaverage soybean oil price at 30-34 cents per pound compared to a 2016/17 average of 31.75 cents.

Peanut Acreage Increase May Push Production Higher

For 2017/18, a broad-based interest to grow more peanuts would raise U.S. sown acreage by 5 percent to 1.75 million acres. This would be the highest acreage since 1991/92. Harvested acreage, however, is expected to increase nearly 9 percent. This reflects a more normal level of acreage abandonment this year in Texas.

Last year, an unusually high acreage of unirrigated peanuts in west Texas was abandoned. This spring, generally dry soil moisture conditions in the Southeast have allowed planting to proceed quickly. The yield trend in peanuts may be retreating from its former highs.

A shortening of crop rotations has been exacerbating disease problems. U.S. peanut production in 2017/18 is forecast up 8 percent to 6.1 billion pounds.

Domestic food demand for peanuts in 2017/18 is forecast up 3 percent to 3.3 billion pounds. Strong export demand for U.S. peanuts may continue as well–supported at the 2016/17 level of 1.4 billion pounds.

China has quickly emerged as the leading foreign market for U.S. peanuts. Imports by China are likely to stay firm as processors there are seeking to augment the production of peanut oil.

Higher Cottonseed Output Would Buoy Demand

Intended planting of cotton in 2017/18 is up 21 percent to 12.2 million acres, which would be the highest level since 2012/13. This year’s expansion of cotton acreage would occur in every State except Florida.

Corn and sorghum acreage is lower in many States where intentions to plant cotton are higher. Texas accounts for the largest increase in cotton planting. Based on trend yields and average rates of abandonment, U.S. production of cottonseed is projected at 6.3 million short tons.

If realized, this would exceed 2016/17 production of cottonseed by 18 percent. A less expensive and more ample 2017/18 supply may stimulate a rebound in cottonseed crushing to a 5-year high of 2.2 million tons, versus 1.8 million this year. Feeding of whole cottonseed could also swell by 12 percent to 3.7 million tons.

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