Oil Crops Outlook: Robust Soybean Meal Use Spurs Record Crush

Based on strong soybean meal demand, USDA raised its 2017/18 marketing year forecast of the domestic soybean crush by 25 million bushels this month to a record 2.015 billion. The higher expected crush lowers the U.S. season-ending stocks forecast from 530 million bushels to 505 million. Improved soybean demand is seen inching up the 2017/18 average farm price by 5 cents to $9.40 per bushel.

Domestic Outlook

Oilseeds Planting for 2018/19 Proceeds Smoothly

Following a cold April for the Midwest, record warm May temperatures readied soils and established a favorable environment for soybean planting. USDA’s Crop Progress report for June 10 indicated that 93 percent of the U.S. soybean crop had been sown, compared to the 5-year average of 85 percent. Crop germination was also aided by early June rainfall, with emergence at 83 percent compared to a 5-year average of 69 percent. Planting for other oilseed crops, including sunflowerseed and canola, was similarly ahead of schedule this spring.

In late May, heavy rains were deposited throughout the Southeast by remnants of the tropical storm Alberto. Wet conditions stalled peanut planting, particularly in Georgia. USDA reported a moderate lag in planting the U.S. peanut crop, with 91 percent sown by June 10 compared to the 5-year average of 94 percent. By contrast, Texas peanut planting is not delayed, but soils there are very dry and unirrigated peanut acreage could benefit from a soaking rain.

Processors Maintain a Brisk Soybean Crush

USDA raised its 2017/18 marketing year forecast of the domestic soybean crush by 25 million bushels this month to a record 2.015 billion. Strong soybean meal demand is driving the industry’s current success. This season, U.S. export shipments of soybean meal may rival the 2014/15 record of 13.1 million short tons.

Also, the rate of domestic soybean meal use has gained momentum partly from its lower than usual protein content, and is expected to reach 35.2 million tons compared to last month’s forecast of 35 million. In forecasting 2018/19 domestic consumption, USDA maintains the same growth rate as before, for a 200,000-ton increase to 35.4 million.

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As with soybean meal, robust foreign trade in soybean oil should continue throughout the summer on account of relatively weak competition from Argentina. The price discount between U.S. and Argentine soybean oil is seldom so wide at this time of year. In May, U.S. soybean oil shipments surged, supporting a higher 2017/18 export forecast by 100 million pounds to 2.4 billion.

On the other hand, the domestic use of soybean oil in April slowed, causing stocks to accumulate even as production declined. This led USDA to trim its forecast of domestic disappearance for 2017/18 this month by 100 million pounds to 20.6 billion.

Export shipments of soybeans for 2017/18 are now also running at a seasonally strong pace, based on a revival of new sales this spring to Europe, Taiwan, Mexico, and Egypt. This is supportive of this month’s U.S. export forecast is unchanged at 2.065 billion bushels. The higher expected crush alone lowers the season-ending stocks forecast from 530 million bushels to 505 million.

The improved demand outlook is seen inching up the 2017/18 average farm price by 5 cents to $9.40 per bushel. This spring, prices received by U.S. farmers have reflected the impact of Argentine crop losses, with a spike above $9.80 per bushel.

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