Oil Crops Outlook: Soybean Growers Face Mounting Storage Issues

USDA’s Crop Production report in October forecasts a 2018/19 soybean crop of 4.69 billion bushels based on a 514,000-acre reduction in expected harvested acreage. In contrast, the soybean yield improved slightly to 53.1 bushels per acre from the September forecast of 52.8 bushels. Forecasts of U.S. exports and crush were unchanged at 2.06 billion and 2.07 billion bushels, respectively.

Due to an increase for beginning stocks, 2018/19 season-ending stocks would swell to an extraordinarily high 885 million bushels. The forecast of the 2018/19 U.S. average farm price is unchanged at $7.35-$9.85 per bushel.

Domestic Outlook

Excessive Wetness Disrupts Soybean Harvesting

The 2018/19 growing season for soybeans is effectively over, with only harvesting left to complete. Maturity of the crop (now denoted by leaf dropping on 91 percent of the total acreage) is more advanced than usual. Last summer’s abundant rainfall was highly beneficial to soybean crop development. But for a broad swath of the country, progress of the fall harvest has been slowed by the untimely persistence of wet weather into October.

For instance, it was the second-wettest September since 1895 for Ohio, and the third-wettest for Iowa, Kentucky, Tennessee, and Pennsylvania.

For the central Gulf Coast, remnants of the tropical storm Gordon in early September dumped heavy rains throughout the region. Recent snowfall in the Northern Plains is slowing harvest activity, too. Recent trend for cooler temperatures are also hindering the drying of fields. As of October 7, farmers had completed harvesting for 32 percent of the U.S. soybean crop. This lagged the 5-year average of 36 percent and may fall further behind if the weather pattern does not change soon.

Once the crop can be fully harvested, though, it may prove to be the largest ever recorded. USDA’s Crop Production report in October forecast a 2018/19 soybean crop of 4.69 billion bushels—exceeding last year’s high by 6 percent. The expected U.S. crop slipped 4 million bushels from last month’s forecast due to a 514,000-acre reduction in expected harvested acreage.

Acreage reductions for Arkansas, Indiana, Illinois, Kansas, and Kentucky more than offset increases for North Dakota and Nebraska. In contrast, the soybean yield improved slightly to 53.1 bushels per acre from the September forecast of 52.8 bushels. Even higher yields are anticipated this month for Iowa, Ohio, and Missouri.

Last month, USDA’s Grain Stocks report indicated that 2018/19 beginning soybean stocks on September 1 totaled 438.1 million bushels. That inventory is an 11-year high and a substantial jump from last year’s carryover of 301.6 million bushels. This finding, coupled with the known use of soybeans in 2017/18, contributed to an upward revision for old-crop production by 19 million bushels to 4.411 billion.

When these carryover stocks are combined with the bountiful new-crop output, 2018/19 total supplies may be an all-time high 5.153 billion bushels.

U.S. export sales and shipments of soybeans started the 2018/19 season in September more slowly than usual. Low prices have strengthened soybean sales and shipments to the EU, Mexico, Egypt, Argentina, and a number of Asian countries. Despite sharp U.S. sales gains for these markets, the overall pace is the lowest in 7 years due to a steep decline in trade with China.

The altered composition of U.S. export markets this year may be shifting a higher percentage of shipments into the second half of 2018/19. While South American exporters are being called on to service China’s import demand, by next spring U.S. exports will dominate other import markets even after the new-crop harvests in Brazil and Argentina.

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This season’s U.S. export forecast is unchanged at 2.06 billion bushels.

Expected domestic use of soybeans is also unchanged this month. Thus, USDA forecasts that all of the supply increase for soybeans in 2018/19 would swell season-ending stocks to an extraordinarily high 885 million bushels. Abundant supplies of corn, soybeans, and wheat will strain storage capacity this fall. If export demand for soybeans was stronger, this might be less problematic for some regions where crop production has surged the most.

Storage of the soybean crop will be facilitated by an uncommonly large price spread between the November 2018 and July 2019 futures contracts. Nevertheless, wet harvest conditions may only compound the costs that producers incur to maintain crop quality during storage.

Price discounts will be deducted from any soybean deliveries that contain more than allowable levels of moisture, sprouting, or mold damage. The forecast of the 2018/19 U.S. average farm price is unchanged at $7.35-$9.85 per bushel.

Canola Crop Expands While Sunflowerseed Contracts

U.S. canola production in 2018/19 is forecast at a record 3.6 billion pounds based on near-record acreage (1.99 million acres) and a record yield (1,864 pounds per acre). Growing-season weather was mostly favorable for the crop. Top-producing North Dakota accounts for most of the year-to-year increase in production. The growth in 2018/19 domestic supplies may trim U.S. canola imports to 1.26 billion pounds from 1.43 billion in 2017/18.

A modest expansion in total canola supplies and lower prices are seen raising the 2018/19 domestic crush by 15 percent to 4.44 billion pounds. Comparable gains for the domestic use of canola oil and canola meal would be the result. By early October, cash prices for canola were weakening toward $16 per hundredweight, compared to $17 a year earlier.

In 2018/19, U.S. acreage sown to sunflowerseed declined 7 percent from the previous year to 1.3 million acres, a 4-decade low. Compared to USDA’s June Acreage report, the October area estimate was revised down by 159,000 acres. This year’s decline in sunflowerseed acreage is equally divided between oil-type and non-oil-type varieties.

Sunflowerseed yields are also seen lower in 2018/19, with the national average yield forecast sliding to 1,560 pounds per acre versus 1,616 pounds last year. Thus, 2018/19 production of U.S. sunflowerseed is forecast down 10 percent from last year to 1.93 billion pounds. Only 6 percent of the harvest had been completed by October 7.

The decline in this year’s larger sunflowerseed harvest will be accentuated by a much lower level of beginning stocks—at 386 million pounds. By comparison, 2017/18 beginning stocks had ballooned to 590 million pounds due to an accumulation from consecutively good crops. For 2018/19, a lower total supply will likely ration domestic use and exports of sunflowerseed as well as further tighten season-ending stocks.

Storms Threaten Peanut and Cottonseed Harvests

USDA raised its 2018/19 production forecast for peanuts by 9 million pounds this month to 5.77 billion. Higher anticipated yields for Texas, Alabama, and Florida more than offset a decline for North Carolina. Overall, the 2018/19 peanut yield is revised up 16 pounds per acre this month to 4,167 pounds.

The yield improved from the 2017/18 average of 4,007 pounds per acre and is topped only by the record 2012/13 season. Compared to the revised 2017/18 total of 7.11 billion pounds, peanut production would be decreased 19 percent, led by an acreage reduction for Georgia.

In the Southeast, harvest conditions for peanuts have been wet and could stay that way for weeks. In September, Hurricane Florence deposited torrential rainfall on the region, with major flooding in North Carolina. However, the main peanut production region of North Carolina, in the northeast corner of the State, received less rainfall, so peanut farms largely escaped the devastation visited on other commodity producers.

During October 10-11—after USDA’s crop surveys were conducted—a second major tropical storm (Michael) quickly moved northward through the heart of the Southeastern peanut belt. A full assessment of storm damage will not be determined until after next month’s USDA production report.

But interruptions to harvest progress could be unavoidable as heavy rains fell on cropland that in some locations was already saturated. As of October 7, peanuts had been harvested.on 38 percent of the acreage in Georgia, 58 percent in Florida, 14 percent in South Carolina, and 25 percent in North Carolina.

The forecast of U.S. cottonseed production for 2018/19 was raised 28,000 short tons this month to 6.184 million tons. The increase was based on higher production forecasts for Texas and Georgia. These more than offset declines for North Carolina and South Carolina, where Florence-related flooding led to harvest losses.

Cotton crops are now vulnerable to more damage from heavy rainfall and high winds. At the time of the latest storm, a high percentage of the Southeast cotton acreage had bolls that were opening. As of October 7, cotton harvesting was completed for only 12 percent of acreage in Georgia, 10 percent in South Carolina, and 8 percent in North Carolina.

Full report.

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