USDA trimmed the 2017/18 soybean export forecast 25 million bushels this month to 2.225 billion as sales commitments and shipments have continued to lag. Coupled with an increase for seed use, a lowering of the export forecast is seen raising 2017/18 ending stocks by 20 million bushels to 445 million. The expected U.S. season-average farm price is narrowed to $8.60-$10.00 per bushel from last month’s forecast of $8.45-$10.15.
Despite Brisk First-Quarter Demand, Soybean Stocks Abound
In October, U.S. processors crushed 175.9 million bushels of soybeans, well above September’s 145.4 million bushels and an all-time high. The growth in crushing was anticipated, though, and USDA’s forecast of the 2017/18 soybean crush is unchanged at 1.94 billion bushels.
U.S. soybean exports in 2017/18 are still expected to eclipse the 2016/17 record. However, export sales and shipments have continued to lag well behind last year’s pace as competition has eroded the U.S. market share. As of November 30, U.S. cumulative export inspections of soybeans were 119 million bushels below year-earlier level.
Shipments to China—where importers have been able to source from other exporters—account for most of the deficit. Specifically, competing soybean shipments from Brazil also established a new high for November. Thus, USDA trimmed its 2017/18 forecast 25 million bushels this month to 2.225 billion.
Coupled with an increase for seed use, a lowering of the soybean export forecast is seen raising 2017/18 soybean ending stocks by 20 million bushels to 445 million. If realized, the year-end carryout would be the largest since the 2006/07 record.
When USDA reports December 1 soybean stocks next month, they could be the largest ever, by a wide margin, for the season’s first quarter. The expected U.S. season-average farm price is narrowed to $8.60-$10.00 per bushel from last month’s forecast of $8.45-$10.15.
Soybean Oil Market Stays Tight Despite Strong Production
Despite the surge in soybean crushing in October, month-ending stocks of soybean oil tightened to 1.63 billion pounds—the country’s lowest inventory since late 2014. The squeeze on soybean oil supplies can be explained by impressive domestic use, which in October also surpassed its highest ever level. The availability of soybean oil supplies is unlikely to soon improve, though.
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Biodiesel is a primary contributor to the expected robust demand for soybean oil. USDA boosted its forecast of the 2017/18 use of soybean oil for biodiesel this month by 500 million pounds to 7.5 billion as policy parameters were clarified. On November 30, an announcement by EPA affirmed no change in the previously proposed 2018 obligation to blend 2.1 billion gallons of biodiesel and also proposed a 2019 requirement at 2.1 billion gallons.
Concurrently, a final ruling by the International Trade Commission affirmed injury to U.S. biodiesel producers by subsidized exports from Argentina and Indonesia, completing a process that imposes countervailing duties on biodiesel imports from those countries for a minimum of 5 years. In September, U.S. biodiesel imports from Argentina plummeted following the assessment of preliminary duties.
Demand for soybean oil should expand as U.S. biodiesel producers regain their market share. Since July, U.S. biodiesel output reported by the Energy Information Administration has been at an all-time high.
A rise in the use of soybean oil for biodiesel could constrain other markets. U.S. consumption of soybean oil in food uses may slip to 13.5 billion pounds compared to 13.64 billion in 2016/17, although higher imports of canola oil and palm oil could compensate for some of the decline in use of soybean oil. A strengthening of prices could also further disadvantage U.S. soybean oil exports against foreign competition.
The forecast of 2017/18 soybean oil exports was scaled back 200 million pounds this month to a 4-year low of 1.9 billion pounds. On November 30, U.S. export sales commitments of soybean oil were only half of their year-earlier level.