Oilseeds Outlook: Modestly Higher Soybean Yields Offset a Reduced Stocks Carryover

USDA’s Crop Production report this month raised its forecast of the 2017/18 U.S. soybean yield to 49.9 bushels per acre, from 49.4 bushels in August. With harvested acreage unchanged, the yield increase boosts this year’s forecast soybean production by 50 million bushels to 4.431 billion.

More growth for a record supply of soybeans led USDA to raise its forecast of 2017/18 soybean exports by 25 million bushels this month to 2.25 billion. Season-ending stocks for 2017/18 are forecast unchanged at 475 million bushels.

Domestic Outlook

August Rains and Moderate Temperatures Improve Soybean Yield Outlook

USDA’s Crop Production report this month raised its forecast of the 2017/18 U.S. soybean yield to 49.9 bushels per acre, from 49.4 bushels in August. Higher yields in South Dakota, North Dakota, Iowa, and Kansas (due to improved August rainfall) account for much of this month’s increase.

With harvested acreage unchanged, the yield increase boosts this year’s forecast soybean production by 50 million bushels to 4.431 billion. Soybean harvesting is well underway in the Mississippi Delta and Southwest regions. In the Midwest, little harvesting of soybeans has occurred so far, but its commencement is imminent as crop maturity is well advanced.

As of September 10, 22 percent of the U.S. soybean acreage was dropping leaves.

Higher old-crop soybean demand shrank 2017/18 expected beginning stocks this month by 25 million bushels to 345 million, partly offsetting the higher production forecast. Even though August soybean exports could not match the surge of a year ago, they were the second-highest ever for the month.

Soybean exports for 2016/17 are seen finishing the crop year at 2.17 billion bushels—up 20 million from last month’s forecast. USDA’s forecast of the old-crop soybean crush is also raised by 5 million bushels this month to 1.895 billion after its pace revived in July. Late summer exports of soybean meal and soybean oil are also ending the 2016/17 season on a strong note.

More growth for a record supply of soybeans led USDA to raise its forecast of 2017/18 soybean exports by 25 million bushels this month to 2.25 billion. This month’s increase matches the gain in supply, so season-ending stocks are forecast unchanged at 475 million bushels.

Even with demand for soybeans expected at an all-time high, abundant supplies will limit upward movement in prices. The forecast range for the 2017/18 average price is lowered 10 cents this month to $8.35-$10.05 per bushel.

Similarly, the forecast average price of soybean meal for 2017/18 is trimmed $5 per short ton to $290-$330.

Soybean Oil Prices Strengthen as Forecast Use in Biodiesel Brightens

This month, USDA forecast 2017/18 domestic use for biodiesel 550 million pounds higher to 7 billion. On August 28, the Commerce Department published its notification of a preliminary countervailing duty on biodiesel imports from Argentina and Indonesia—sources for nearly 80 percent of all U.S. imports of the commodity.

This action followed a finding from an earlier investigation that the biodiesel imports were unfairly subsidized and damaging domestic producers. For January-December 2016, U.S. imports of biodiesel from Argentina and Indonesia totaled 1.475 million and 370,000 metric tons, respectively.

Importers of biodiesel from these countries are now required to make cash deposits of the duties (retroactive to May 31) until a final duty determination is made in November. The preliminary ad valorum duty rates range from 50-64 percent on Argentine imports and 41-68 percent on Indonesian imports, which (based on current data available to the Commerce Department) reflect the estimated value of the subsidy.

A separate determination of antidumping duties is due later this fall.

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The effect of the duties will be felt immediately. U.S. biodiesel imports should fall sharply and encourage higher output by domestic producers. Expanding demand for soybean oil (which accounts for approximately half of U.S. biodiesel feedstock) would follow.

In response, the value of soybean oil has strengthened. USDA raised its forecast of the 2017/18 average price for soybean oil to 32.5-36.5 cents per pound from 31-35 cents last month to reflect the new market environment.

However, an expected rise in soybean oil prices may constrain export demand. USDA lowered its forecast of soybean oil exports for 2017/18 by 200 million pounds to 2.1 billion, following a (revised) 2.55 billion in 2016/17. Even so, stronger domestic use could reduce soybean oil stocks below the current level.

Storm Damage May Affect Huge Supplies of Peanuts and Cottonseed

U.S. peanut production for 2017/18 is forecast to expand to 7.78 billion pounds. If realized, this year’s peanut crop would be 15 percent higher than the previous record in 2012/13 and exceed last year’s harvest by 2.1 billion pounds (37 percent). The year-to-year production increase for Georgia alone would be 1.1 billion pounds.

This month’s change is based on an increase for the average yield to a record 4,254 pounds per acre and larger harvested area. Based on the current production forecast, season-ending peanut stocks are seen accumulating to a 5-year high. Inventories could nearly double to 2.7 billion pounds from the final 2016/17 carryout of 1.44 billion.

The forecast for excellent production is provisional, however. In early September, Hurricane Irma produced heavy rainfall over much of the Southeast’s peanut growing region. This event occurred after the collection of this month’s yield survey data. As of September 10, little of the country’s peanut acreage had been dug from the soil and only 3 percent had been harvested.

Next month, the USDA’s National Agricultural Statistics Service will resurvey harvested acreage estimates for peanuts in Alabama, Florida, Georgia, and South Carolina, which collectively account for 72 percent of the total area sown this year.

U.S. cottonseed production for 2017/18 is forecast up to 6.9 million short tons versus 6.5 million last month. Based on the highest harvested acreage since 2006/07 and the highest yield since 2012/13, cottonseed output would expand to an 11-year high.

Ample supplies of cottonseed and a favorable price outlook for cottonseed oil could boost the 2017/18 crush to 2.4 million tons from 1.76 million in 2016/17.

However, in late August, torrential rainfall from Hurricane Harvey inundated parts of the Texas Gulf cotton region. And, in the Southeast, unharvested open-boll cotton was also vulnerable to excessive rain and high winds from Irma. The extent of damage will be assessed in the October Crop Production report.

While Texas farmers may have been able to harvest much of their cotton before the storm, postharvest losses could have occurred, as well. Cotton modules are a pneumatically compressed preparation of the crop made to facilitate transport to gins.

Any undelivered harvested cotton modules that were still present when fields were flooded could have been damaged. Post-harvest losses from flooding may not be fully known until March 2018, when the cotton has been entirely accounted for in USDA ginning reports.

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