Oil Crops Outlook: Sharply Lower Soybean Crop To Slash Stocks

The NASS September Crop Production report lowered the U.S. soybean yield forecast by 0.6 bushel to 47.9 bushels per acre. Based on a lower yield, the U.S. crop for 2019/20 is trimmed 48 million bushels this month to 3.633 billion.

Although USDA left its forecasts of new-crop soybean demand unchanged this month, lower supplies are expected to reduce 2019/20 season-ending soybean stocks by 115 million bushels to 640 million. The expected stocks reduction prompted USDA to raise its forecast of the U.S. season-average farm price by 10 cents to $8.50 per bushel.

Domestic Outlook

Lower Yield Reduces Forecast of U.S. Soybean Production

This month, USDA’s National Agricultural Statistics Service—in addition to its farmer-reported yield survey and remote sensing analysis—conducted its first objective yield survey for the 2019/20 soybean crop. For the top 11 soybean producing States, this survey randomly sampled fields from the June acreage survey.

Between August 24 and September 1, NASS enumerators determined the density of plants and the number of branches and flowers from a section of a field. Based on the crop’s maturity level, the number of pods is then calculated with these data. If pods with beans are present on the plants, they are counted and weighed.

Historical parameters are key elements of this month’s yield forecast, since the percentage of soybean acreage that was setting pods by September 1 was only 86 percent—the lowest since 1981.

Weather in August is usually a critical determinant of U.S. soybean yields. Throughout the Midwest, precipitation and temperatures this August mostly stayed near historical averages. Nevertheless, the soybean crop has had less time to produce vegetation this summer than most years. An extended 2019 growing season (through the end of September) would be highly beneficial.

The September Crop Production report incorporates information from the yield surveys to indicate an updated U.S. soybean yield forecast of 47.9 bushels per acre. The forecast is down 0.6 bushel from last month and below last year’s 51.6 bushels. As of September 8, 55 percent of the soybean crop was rated in good-to-excellent condition, down 13 percentage points from a year earlier.

The principal yield-related crop losses from last month are reported in Illinois, Iowa, and Minnesota, but there are reductions for 10 other States, as well. Based on a lower yield, the U.S. crop for 2019/20 is trimmed 48 million bushels this month to 3.633 billion.

Despite its delayed start, the soybean crop is now well advanced into pod development. Many soybean fields, however, are still quite green at a time when they have typically turned yellow. Ordinarily, only a small percentage of soybeans—mainly in the South—are mature enough to be harvested in September.

Harvest progress this season is behind due to lengthy planting delays last spring. Soybean crops must proceed through essential stages of maturing and drying. So, the greater part of the 2019/20 harvest will not take place until well into October—weather permitting.

Although USDA left its forecasts of new-crop soybean demand unchanged this month, a reduced 2019/20 carryout is anticipated based on lower production and beginning stocks.

Compared to last month, the decline in soybean supplies is forecast to reduce 2019/20 season-ending stocks by 115 million bushels to 640 million. The expected stocks reduction prompted USDA to raise its forecast of the U.S. season-average farm price by 10 cents to $8.50 per bushel.

Soybean Demand Ends Strongly for 2018/19

Domestic soybean crushing rebounded in July to 179.5 million bushels after slumping to 157.6 million bushels in June, when some processors took downtime for servicing of equipment. The late seasonal strength prompted an increase in USDA’s estimate of the 2018/19 crush this month by 20 million bushels to 2.085 billion.

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Increases in domestic use and exports of soybean meal largely account for the stronger crush demand. Domestic soybean oil use is also seen 250 million pounds above last month’s forecast.

Similarly, U.S. soybean exports concluded the 2018/19 crop year with a flourish. At 180 million bushels, August export inspections of soybeans totaled an all-time high for the month. The data rounds out the September-August crop marketing year with an atypical export pattern; August shipments were nearly as high as in October and November.

The unseasonably strong revival in U.S. export demand this summer was stimulated by competitive prices and a slowing of shipments from Brazil. China accounted for a majority of the August gain in U.S. soybean shipments, which surged when sales that were booked early this year finally got shipped. As a consequence, USDA raised its 2018/19 estimate of U.S. exports this month by 45 million bushels to 1.745 billion.

While this summer’s strong demand pace pares carryout soybean stocks by 65 million bushels from previous expectations, the revised forecast of 1.005 billion bushels still represents an all-time high.

Record Peanut Yields Temper Prices and Boost Domestic Food Consumption

As of September 8, 64 percent of U.S. peanut acreage was rated in good-to-excellent condition, compared to 72 percent a year earlier. The national average yield is forecast at 4,086 pounds per acre, ranking behind only the 2012/13 record. The expected yield is up 78 pounds per acre from last month and 95 pounds above 2018/19.

Forecast yields held steady or higher for most of the peanut growing States, except for Virginia. Compared to last year, the largest yield gains are expected for Florida, Mississippi, North Carolina, and Oklahoma. Forecast U.S. production for 2019/20 is revised up 7 percent from last month to 5.65 billion pounds.

Certified acreage data indicates that the 2019/20 U.S. peanut area planted stayed flat—at 1.4 million acres. However, several of the peanut producing States, particularly Georgia and Florida, are likely to have an increase in area harvested and production.

Season-ending peanut stocks were at an all-time high after the record 2017/18 crop. Since then, lower crops have gradually trimmed inventories. The expectation for 2019/20 season-ending peanut stocks is 2.2 billion pounds, a decline of 194 million pounds from 2018/19.

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