USDA estimates the 2017/18 U.S. soybean crop at 4.392 billion bushels as the national average yield slipped 0.4 bushels to 49.1 bushels per acre. USDA forecasts the soybean crush 10 million bushels higher this month to 1.95 billion.
Based on a current shortfall in U.S. outstanding export sales commitments of soybeans, USDA’s 2017/18 export forecast is lowered 65 million bushels this month to 2.16 billion. The revised use forecasts raise the expectation of season-ending soybean stocks to 470 million bushels from 445 million last month.
Soybean Stocks Abound Despite Brisk First-Quarter Demand
In this month’s Crop Production—Annual Summary report, USDA published an estimate of the 2017/18 U.S. soybean crop at 4.392 billion bushels. Compared to the previous forecast, the crop estimate declined 34 million bushels. Lower yields for Kansas, North Dakota, and South Dakota offset higher estimates for Minnesota and Iowa.
Even so, the crop eclipses last year’s former high of 4.296 billion bushels. The national average soybean yield slipped 0.4 bushels to 49.1 bushels per acre.
Trimming the soybean harvest estimate has minimal impact on beginning supplies for 2017/18 as they are still at an all-time high. After a decline in September-November use, U.S. stocks at the end of the first quarter of 2017/18 are still quite abundant. USDA’s latest Grain Stocks report indicated that December 1 soybean stocks were a record 3.157 billion bushels, well above the year-earlier level of 2.899 billion.
In 2017/18, domestic processors may need to crush more soybeans, given lower yield expectations for oil and meal. The cumulative soybean crush for September-November 2017 totaled 494.6 million bushels, surpassing last year’s record first quarter by nearly 10 million bushels. For the entire 2017/18 marketing year, USDA forecasts the soybean crush 10 million bushels higher this month to 1.95 billion, compared to 1.899 billion in 2016/17.
The extraction rate for soybean meal in 2017/18 may improve only modestly against last season’s low level and stay below the long-term average. Soybean meal use is forecast unchanged this month as a lower extraction rate offsets the higher crush. Forecasts of soybean meal use are unchanged.
Currently, U.S. soybean meal export sales commitments for 2017/18 are slightly ahead of a year ago. A more subdued pace of Argentine crushing and meal exports has benefited U.S. soybean meal sales. Argentine processors have had difficulty obtaining soybeans from farmers, who have withheld old-crop sales in anticipation of a scheduled reduction in export taxes.
Farm deliveries have also been slowed by recent depreciation of the peso. Since early December, the peso has lost 8 percent of its value against the U.S. dollar, with a corresponding rally in Argentine soybean prices leading farmers to postpone sales.
Grain News on AgFax
Even with a higher U.S. crush rate this year, a tight domestic market for soybean oil could linger. One factor in that assessment is that this season’s soybean oil extraction rates are seen declining from the 2016/17 level. Also preventing soybean oil inventories from accumulating is higher domestic use, particularly for biodiesel.
Last, other vegetable oils (including canola oil, cottonseed oil, sunflowerseed oil, peanut oil, and corn oil) can only supplement supplies moderately this year. Season-ending soybean oil stocks may then shrink to 1.536 billion pounds, compared to the 2016/17 carryout of 1.711 billion. The lack of a rally in soybean oil prices to date could be attributed to less robust export demand.
Growth in the domestic use of soybeans, however, is being more than offset by an acute lag in export demand. For the first quarter alone, U.S. soybean exports for 2017/18 are down 77 million bushels compared to a year earlier. The gap widened with another decline in December shipments as export competition from Brazil has persisted.
Most of the deficit against last year’s U.S. pace can be accredited to sluggish trade with China. By comparison, Brazil’s soybean exports to China swelled four-fold in October-December 2017 from a year ago (representing a gain of 4.5 million metric tons, or 167 million bushels). The current shortfall in U.S. outstanding export sales commitments does not portend an imminent resurgence in soybean shipments, either.
Thus, USDA’s 2017/18 export forecast for soybeans is lowered 65 million bushels this month to 2.16 billion, versus 2.174 billion for 2016/17. The forecast implies a narrowing of the sales gap and a larger than usual percentage of exports in the season’s second half.
By March, U.S. soybean stocks will be more than adequate to allow an export resurgence. This outlook may ultimately hinge on prospects for South American new-crop production. The revised use forecasts raise anticipated season-ending soybean stocks to 470 million bushels from 445 million last month.
Acreage Gains and High Yields Boost Cottonseed and Peanut Output
The estimated U.S. cottonseed crop for 2017/18—at 6.7 million short tons—is the largest since 2006/07. The year’s greatest production gains are for Texas, Oklahoma, and Mississippi, where farmers most expanded cotton acreage. Cottonseed yields per acre also ranked among the best years ever.
The subsequent plunge in cottonseed prices (now down to an 11-year low) is stimulating demand for the commodity. Equipped with an improved supply, processors accelerated the August-November 2017 cottonseed crush by 14 percent from a year earlier.
For the full 2017/18 season, USDA forecasts the cottonseed crush to expand to 2.3 million short tons from 1.77 million in 2016/17. An expected higher output of cottonseed oil has shrunk its price premium, relative to soybean oil, to the narrowest level in 5 years. U.S. cottonseed exports have also proceeded more briskly in 2017/18 and may climb to a 10-year high of 450,000 tons.
The 2017/18 U.S. peanut crop is lowered 405 million pounds this month to 7.234 billion. Downward yield revisions for Georgia and Alabama and a reduction in harvested area for Texas account for most of the decline in output. The supply change does not materially alter the market’s direction, however.
This season’s harvest still shatters its previous 2012/13 record of 6.75 billion pounds. U.S. peanut production in 2017/18 benefited from an all-time high for sown acreage while the estimated peanut yield (4,074 pounds per acre) is the second-highest ever. Despite a slow start for the peanut use in 2017/18 (due to a decline in the August-November crush), forecast demand for the season is expected to expand 3.6 percent.
At that level of demand, season-ending stocks may stay relatively high at nearly 2.5 billion pounds, considerably above the 2016/17 carryout of 1.442 billion pounds.
Tighter Supplies of Canola and Sunflowerseed Constrain Demand
This month, an upward yield revision raised the final estimate of 2017/18 sunflowerseed production by 359 million pounds to 2.2 billion. Even so, the 2017/18 sunflowerseed harvest is down 18 percent from last year and is the smallest since 2006/07. Production of oil-type varieties, which fell 22 percent to 1.857 billion pounds, accounted for all of the reduction.
In contrast, better yields increased the harvest of non-oil-type varieties by 10 percent to 312 million pounds. An early summer drought in North Dakota and South Dakota last year reduced the national average yield to 1,613 pounds per acre from 1,731 pounds in 2016/17. The yield reductions exacerbated a 12-percent decline in U.S. area sown to sunflowerseed (1.4 million acres).
However, the impact on total supplies of sunflowerseed is tempered by an 11-year high in carryover stocks. The increase in total sunflowerseed demand for 2017/18 could be minimal, so the reduction in supplies may mostly tighten up ending stocks.
Likewise, canola yields also suffered from severe summer dryness in the Northern Plains. The U.S. average yield for 2017/18 fell to 1,558 pounds per acre versus last year’s record of 1,824 pounds. But supported by a 21-percent increase in U.S. canola acreage, the 2017/18 production estimate increased 1 percent to 3.1 billion pounds.
At the same time, the availability of imported canola in 2017/18 is diminished by a tighter Canadian supply. A 17-percent decline in the June-November 2017 cumulative crush indicates the impact of a tighter market supply. USDA forecasts the 2017/18 crush to decline to 4.2 billion pounds from 4.4 billion in 2016/17.
Flaxseed yields plummeted in 2017/18 to 14.1 bushels per acre—the lowest since 1989/90. By comparison, the 2016/17 yield was 23.7 bushels. Coupled with a 26-percent decline in harvested acreage, total flaxseed production in 2017/18 slumped to 3.8 million bushels from 8.7 million in 2016/17.
Production declined in all States, but North Dakota accounted for 93 percent of the year-to-year reduction. Higher imports from Canada are expected to make up the deficit.