Oil Crops Outlook: Minimal U.S. Soybean Crop Changes, Lower Demand

In this month’s Crop Production report, the U.S. average yield forecast for soybeans is fractionally lower at 46.9 bushels per acre. This month’s yield changes shaved only 304,000 bushels from USDA’s 2019/20 forecast of U.S. soybean production—to just under 3.55 billion. In contrast, the domestic crush for 2019/20 is forecast down by 15 million bushels to 2.105 billion based on a dimmer outlook for soybean meal exports.

This boosts the forecast of U.S. season-ending soybean stocks by 15 million bushels to 475 million. The U.S. season-average farm price for 2019/20 is forecast unchanged at $9.00 per bushel.

Domestic Outlook

Soybean Growers Nearing End of a Difficult Growing Season

The 2019/20 growing season has been fraught with adversities, including spring planting delays, a lack of summer warmth, and fall harvest wetness. Nevertheless, the growing season is finally stumbling toward a close. As of November 3, the U.S. soybean harvest for 2019/20 was 75 percent complete. However, progress for this year’s harvest lags the 5-year average for this date by 12 percentage points.

As such, the soybean harvest is poised for its latest conclusion in 10 years. Many Midwestern regions have been too wet for harvesting to proceed. Some farmers—particularly in the Northern Plains—are still faced with a layer of snow covering their unharvested crops. In both North Dakota and South Dakota, it was the wettest August-October period in 125 years. Consequently, only 56 percent of the North Dakota soybean crop is now harvested compared to the 5-year average of 95 percent.

The cold, damp conditions are triggering a demand surge for liquid propane throughout the Midwest. At current prices, farmers can little afford additional expenses for propane to dry the harvested crops, yet it is essential for storage.

The unfavorable weather is reflected in USDA’s below-trend yield estimates for soybeans. In this month’s Crop Production report, the U.S. average yield forecast is fractionally lower at 46.9 bushels per acre but significantly below last year’s 50.6 bushels. Crop yield forecasts are lowered this month for North Dakota, Michigan, and several southeastern States but are almost completely offset by increases for Minnesota, Indiana, Kansas, and Nebraska.

This month’s yield changes shaved only 304,000 bushels from USDA’s 2019/20 forecast of U.S. soybean production—to just under 3.55 billion. Despite a negligible decline in this month’s production forecast, the 2019/20 crop is 878 million bushels (20 percent) below last year’s harvest.

Although new-crop export demand for U.S. soybeans is seen unchanged this month, the domestic crush is forecast down by 15 million bushels to 2.105 billion. A dimmer outlook for soybean meal exports is the main contributor to the change. Given a recovery in competing shipments from Argentina, U.S. sales of soybean meal to Europe and Vietnam this fall are considerably lower.

Overall, current export sales commitments for soybean meal are down 14 percent from a year ago. Thus, USDA lowered its 2019/20 export forecast for soybean meal by 350,000 short tons to 13.35 million. This boosts the forecast of U.S. season-ending soybean stocks by 15 million bushels to 475 million. The U.S. season-average farm price for 2019/20 is forecast unchanged at $9.00 per bushel.

Soybean Oil Prices Strengthen on a Tightening Supply

Production of soybean oil for 2019/20 is forecast 170 million pounds lower this month due to a dimmer outlook for soybean crushing. Although domestic use of soybean oil may stay unchanged, the export demand may slip another 25 million pounds to 1.7 billion. Therefore, most of the expected reduction in soybean oil supplies may squeeze season-ending stocks down to a 6-year low of 1.45 billion pounds.

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Tightening soybeans and soybean oil supplies are leading to price gains. However, a dimmer global outlook for supplies of rapeseed oil and palm oil is also bolstering prices. In October, soybean oil prices rose to a monthly average of 30.1 cents per pound. This is the highest value since March 2018. The gains prompted USDA to raise its forecast of the 2019/20 average price for soybean oil to 31 cents from 30 cents last month.

Peanut Crop Improves As Outlook for Cottonseed Output Dims

USDA raised its 2019/20 forecast of the U.S. peanut yield this month from 3,964 pounds per acre to 4,080 pounds, which ranks second only to the record 2012/13 yield of 4,211 pounds per acre. Yield gains—mostly throughout the Southeast—boosted the peanut harvest this year by 161 million pounds to 5.64 billion. Despite a production gain, total supplies for 2019/20 are still expected to slip 2 percent due to smaller beginning stocks.

At the same time, domestic food use of peanuts is growing. Food use in August-September 2019 increased 2 percent compared to a year earlier. Total domestic consumption for the full season is expected to continue to grow at this same rate to 4.7 billion pounds. So, with a smaller overall supply and higher expected use, season ending peanut stocks are seen tightening to 2.2 billion pounds in 2019/20 from 2.4 billion in 2018/19.

U.S. cottonseed production for 2019/20 is forecast down 272,000 short tons this month to 6.45 million. Reduced cotton yields in Texas, which USDA forecasts to decline to a 16-year low, account for most of the change. Since August, when hot and dry weather prevailed during the main boll setting period, the Texas cotton crop deteriorated rapidly. A poorer production outlook is likely to curtail gains for cottonseed crushing in 2019/20, which is forecast 150,000 tons lower this month to 1.85 million.

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