Oil Crops Outlook: Higher U.S. Soybean Yields Swell Crop Supplies

USDA’s first assessment of the 2018/19 U.S. soybean crop based on an objective yield survey forecasts a national average yield of 51.6 bushels per acre. On a harvested area estimate of 88.9 million acres, the higher yield boosts the expected U.S. soybean crop to 4.586 billion bushels.

Despite forecasts of a 2018/19 domestic crush and exports that are each raised to 2.06 billion bushels, a much larger gain for the crop estimate swells expected season-ending soybean stocks to a record 785 million bushels. For 2018/19, the U.S. season-average farm price is forecast down 35 cents per bushel this month to $7.65-$10.15.

Domestic Outlook

Record Soybean Crop Seen As Yields Buoyed by Good Weather

Development is ahead of schedule this year for the U.S. soybean crop. Timely planting, followed up by a warm and wet June, promoted rapid plant growth. In July, growing conditions brightened throughout the primary Midwestern growing region with ample soil moisture reserves and near-average temperatures.

By August 5, pods were being set for 75 percent of the soybean acreage compared to the 5-year average of 58 percent. Soil moisture levels are more than adequate throughout the Midwest. The exceptions are Missouri, eastern Kansas, Michigan, and the Mississippi Delta region, where moisture deficits this summer have worsened.

Overall, U.S. crop conditions for soybeans are currently rated 67 percent good-to-excellent—dipping from a month ago but still near a historic peak. This season, pod weights (and ultimately crop yields) should benefit from an extended period between the initiation of soybean pod development and maturity.

In the August Crop Production report, USDA’s first assessment of the 2018/19 U.S. soybean crop—based on an objective yield survey instead of a trend yield —forecasts a national average yield of 51.6 bushels per acre. If realized, this year’s expected yield would rank second only to the 2016/17 record (52 bushels).

Farmers in 8 States—including Illinois, Indiana, Ohio, and Nebraska—could reap record soybean yields this year. On a harvested area estimate of 88.9 million acres, the higher yield boosts the expected U.S. soybean crop to 4.586 billion bushels. The August production forecast is 276 million bushels higher than the previous estimate. This year’s soybean harvest would eclipse last year’s record by 194 million bushels.

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Even with lower expected beginning stocks this month, total supplies of soybeans for 2018/19 are forecast up 240 million bushels to a record 5.04 billion. However, more abundant soybeans may only modestly enhance 2018/19 demand. Forecasts of 2018/19 domestic crush and exports are each raised this month to 2.06 billion bushels. A much larger gain for the crop estimate, though, could swell season-ending soybean stocks to an all-time high 785 million bushels—an 83-percent increase from the expected 2017/18 carryout.

The likelihood of an expanding surplus will suppress soybean prices. For 2018/19, the U.S. season-average farm price is forecast down 35 cents per bushel this month to $7.65-$10.15. However, the monthly average prices received by farmers may remain well above current cash prices for some time. Forward pricing by farmers earlier this year is responsible for such circumstances.

By May, when they began planting, producers had a brief opportunity to contract prices at or above $10 per bushel. Such crop marketing at that higher level will support the monthly average now that current cash prices are nearly $1.50-$2.00 per bushel lower.

The soybean meal market will also be burdened by high 2018/19 supplies; the season-average price is forecast down $20 per short ton this month to $295-$335, versus $350 for 2017/18.

Old-Crop Soybean Demand Stays Robust

In June, processors set another record for domestic soybean crushing at 169.6 million bushels. The enduring strength of this market led USDA this month to raise its U.S. soybean crush forecast for 2017/18 by 10 million bushels to 2.04 billion. A record level of soybean meal exports provides the momentum for this growth in soybean demand.

This month, the 2017/18 forecast of U.S. soybean meal exports was raised 600,000 short tons to 14.1 million versus 11.6 million tons in 2017/18. U.S. shipments of soybean meal have gained market share this year in Indonesia, Philippines, Vietnam, Thailand, and throughout Latin America. A trade windfall has developed amid a deficit of Argentine soybean meal exports.

For October 2017-June 2018, cumulative Argentine exports of soybean meal have slumped 15 percent (3.5 million metric tons) compared to a year earlier.

The U.S. export forecast for 2017/18 was also raised this month by 25 million bushels to 2.11 billion. July export inspections of soybeans—at 118 million bushels—shattered a former high for the month. Achievement of this milestone occurred despite negligible soybean shipments to China. Soybean exports to other regions have strengthened in response to competitively low U.S. prices.

In particular, import markets such as the EU, Thailand, Vietnam, Taiwan, Pakistan, and Egypt have all been more active purchasers of U.S. soybeans. In contrast, Brazil‘s collective April-June exports to these foreign markets has seen a year-to-year decline as it has taken on more of China’s demand. Higher forecasts of domestic use and exports lower the forecast of 2017/18 season-ending soybean stocks this month by 35 million bushels to 430 million.

Yield Outlook for Peanuts is Bright

U.S. peanut production for 2018/19 is forecast at 6.09 billion pounds—down sharply from the all-time high of 7.2 billion pounds last year. While the yield is higher, due to lower sown area, all peanut producing States will see a decline in production for 2018/19, with Georgia accounting for the largest reduction.

The national average peanut yield is forecast at 4,167 pounds per acre, which ranks second highest to the record yields of 2012/13. Compared to last year, yields per acre for 2018/19 are forecast to rise for many peanut growing States. In contrast, Texas, Oklahoma, South Carolina, and Virginia have had bouts of extended dryness and above-average temperatures.

As of August 5, 71 percent of the country’s peanut acreage was rated in good-to-excellent condition. While below the year-earlier level of 79 percent, it is still one of the highest percentages ever for this date. By August 5, 90 percent of peanuts had reached pegging stage, on par with 2017 levels and just 1 percent lower than the 5-year average.

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