Oil Crops Outlook: Soybean Production Soars on Record Yield, Acreage

USDA’s Crop Production report this month indicated an increase in 2018/19 soybean production of 107 million bushels to 4.693 billion. A higher U.S. yield forecast was responsible, which climbed to a record 52.8 bushels per acre from 51.6 bushels last month.

The 2018/19 demand outlook for soybeans, however, is changed minimally due solely to a 10-million-bushel increase for the crush forecast to 2.07 billion. Production gains would swell USDA’s forecast of 2018/19 ending stocks to an all-time high 845 million bushels versus 785 million last month.

USDA lowered its 2018/19 forecast range for the U.S. season-average farm price by 30 cents to $7.35-$9.85 per bushel.

Domestic Outlook

Expanding Surplus of New-Crop Soybeans Weighs on Prices

In July, domestic soybean processors turned in a record pace for the month at 179 million bushels—exceeding the previous high for July by 15 percent. The robust performance prompted USDA this month to boost its forecast of the 2017/18 crush by 15 million bushels to 2.055 billion.

A record level of soybean meal exports—which were forecast higher by 300,000 short tons to 14.4 million—is propelling processor demand for soybeans. U.S. soybean exports also finished the crop year strongly. With the exception of two years ago, export shipments for August 2018 were the largest ever for the month.

The forecast of 2017/18 soybean exports is raised by 20 million bushels this month to 2.13 billion.

For 2018/19, higher old-crop soybean demand trimmed the expected beginning stocks this month by 35 million bushels to 395 million. Nevertheless, expected total supplies for 2018/19 may expand 72 million bushels due to higher forecast production.

This month’s Crop Production report, published by the National Agricultural Statistics Service, indicated an increase in 2018/19 soybean production of 107 million bushels to 4.693 billion. A higher U.S. yield forecast was responsible, which climbed to 52.8 bushels per acre from 51.6 bushels last month. If realized, the new forecast yield would top a 2-year-old record of 52 bushels per acre.

States with higher forecast yields this month include Kansas, Illinois, and Indiana, which more than offset reductions for North Dakota and South Carolina. Summer weather for the Midwest was generally beneficial to soybeans with a lack of extreme temperatures during pod development in August. Crop conditions also improved over the second half of the month following a resurgence in rainfall.

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Soybean crops are rapidly approaching maturity throughout the Midwest, while harvesting is now well underway in Louisiana, Mississippi, and Texas.

The 2018/19 demand outlook for soybeans, however, is changed minimally due solely to a 10-million-bushel increase for the crush forecast to 2.07 billion. Thus, production gains would swell USDA’s forecast of 2018/19 ending stocks to an all-time high 845 million bushels versus 785 million last month.

The outlook for a growing surplus of soybeans led USDA to lower its 2018/19 forecast range for the U.S. season-average farm price by 30 cents to $7.35-$9.85 per bushel. By early September, cash market soybean prices in most parts of the country had fallen below $8.00 per bushel.

Last month, USDA published details of its Market Facilitation Program (MFP), which will compensate commodity producers adversely affected by retaliatory tariffs imposed by foreign countries. As of September 4, eligible soybean producers can apply for a $1.65 per bushel cash payment on half of their 2018/19 certified production.

Based on USDA’s current production estimate, the initial soybean payments could total at least $3.6 billion. At a future date, USDA will announce a MFP payment rate for the second half of the crop if circumstances have not changed.

Lower Acreage and Yields Trim Forecast of Peanut Crop

U.S. peanut production for 2018/19 is forecast to contract to 5.76 billion pounds, down 329 million pounds (5 percent) from the August forecast. This is a potential drop in production of 1.5 billion pounds (20 percent) from the 2017/18 marketing year. Production would be lower this month for all States except Alabama and Virginia, which show a small increase.

Reductions for sown area in Georgia and Texas trimmed the total acreage by 75,500 acres to 1.43 million. The expected national average peanut yield is also down 16 pounds per acre from the August forecast to 4,151 pounds.

By early September, 72 percent of peanut acreage was reported in good-to-excellent condition, down 5 percent compared to a year ago. Yet, the forecast yield would remain the second-highest on record—just 1.4 percent lower than the record yield in 2012/13. As of September 9, only 1 percent of U.S. peanut acreage had been harvested (2 percent below last year)—all of it in Florida, Georgia, and Virginia.

At 2.7 billion pounds, season-ending peanut stocks for 2017/18 were up 88 million pounds compared to the August forecast. The carryover ranks second-highest after the record stock level in 2012/13. Even with higher beginning stocks for 2018/19, the smaller new-crop harvest will reduce the total supply and season-ending inventories. This month’s decline in the 2018/19 ending stocks forecast (by 162 million pounds from the August estimate to 2.556 billion) is due to tempered production.

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