Oil Crops Outlook: U.S. Soy Product Exports Gain from Lagging Argentine Trade

    This month, USDA boosts its forecast of the 2019/20 soybean crush by 20 million bushels to a record 2.125 billion, based on steady soybean meal demand. A current shortfall in Argentine shipments raises forecast soybean meal exports by 250,000 short tons this month to 13.45 million. A higher crush is more than offset by a decline for soybean exports (by 50 million bushels to 1.775 billion). Demand revisions boost the 2019/20 season-ending stocks forecast by 55 million bushels to 480 million.

    Domestic Outlook

    Domestic Soybean Crush is Supported by Stronger Meal Use

    An enhanced U.S. market for soybean crushing stems from strengthening demand for soybean meal. This month, USDA boosts its forecast of the 2019/20 soybean crush by 20 million bushels to a record 2.125 billion. Although recent values for soybean oil have fallen precipitously, crushing margins have remained steady.

    A simultaneous plunge in the March average soybean cash price paid by central Illinois processors (to $8.11 per bushel from $8.96 in February) has sustained the profitability of crushing. The processing margin is also bolstered by a recovery for the monthly soybean meal average price, which rallied in March to nearly $312 per short ton from $295 in February.

    Support for the domestic use of soybean meal derives from robust year-to-year gains in livestock production, especially for hogs. Another factor contributing to higher soybean meal demand is a contraction of protein substitutes. That particularly applies to the corn byproduct feeds produced at ethanol plants. Thus, domestic soybean meal disappearance for 2019/20 is forecast 300,000 short tons higher this month to 37.1 million.

    U.S. exports of soybean meal in 2019/20 are being buoyed, as well, by a current shortfall in Argentine shipments. This supply deficit was tempered by uncommonly strong U.S. exports in the February–March period. The export forecast is up 250,000 short tons this month to 13.45 million. The brighter demand outlook for soybean meal leaves the forecast of its 2019/20 average price unchanged at $305 per short ton.

    An anticipated revival in export demand for soybeans is still pending, however. In March, export inspections of soybeans exhibited a typical seasonal decline in falling to 83 million bushels versus 103 million in February. But unlike a year ago, when large outstanding sales powered a summer boom for soybean shipments, current bookings are considerably lower. U.S. soybean exports for 2019/20 are seen 50 million bushels lower this month to 1.775 billion.

    USDA’s Grain Stocks report last month indicated that March 1 soybean stocks totaled 2.253 billion bushels—a 17-percent decline from a year earlier. Farm stocks data from the survey include estimates of crops still in the field (but expected to be harvested) after some farmers could not fully harvest them last fall. Based on the data for March soybean stocks and September–February use, the seed and residual use is forecast 25 million bushels lower this month.

    The combined effect of this month’s demand revisions is to boost the 2019/20 season-ending stocks forecast by 55 million bushels to 480 million. A higher stocks carryout may pressure soybean prices but that may only modestly affect the 2019/20 average. Due to the advanced level of farm marketing, USDA’s forecast of the U.S. season-average farm price is trimmed by 5 cents this month to $8.65 per bushel.

    Grain News on AgFax

    The soybean oil market may encounter a pronounced impact on domestic consumption this year from rising unemployment and temporary closures of restaurants nationwide. U.S. soybean oil domestic disappearance for 2019/20 is seen down by 500 million pounds this month to 22.4 billion. Of that amount, edible use may decline by 200 million pounds to 14.7 billion pounds. Lagging demand for use in biodiesel accounts for the remaining reduction, which is forecast contracting 300 million pounds to 7.7 billion.

    In contrast, U.S. export demand for soybean oil is quite solid. Cumulative 2019/20 soybean oil shipments through March now exceed last year’s pace by more than 400 million pounds. Recent U.S. export sales have accelerated on account of slower Argentine deliveries. Also aiding the soybean oil sales in developing countries is a rationing of Southeast Asian palm oil shipments.

    For 2019/20, USDA expects the shipments abroad to strengthen by 300 million pounds to 2.4 billion, versus 1.9 billion in 2018/19. Due to higher production and lower domestic use, 2019/20 season-ending soybean oil stocks is now seen staying moderately more abundant than a year ago. A sharp fall for the price of soybean oil in March (from 30.3 cents per pound to 27 cents) reflects the suddenly altered demand outlook.

    USDA lowered its season-average price forecast by 1.5 cents to 30 cents per pound.

    Soybean Planting is Seen Recovering This Year

    On March 31, USDA’s Prospective Plantings report indicated that U.S. farmers intend this year to plant 83.5 million acres of soybeans. If realized, the 2020/21 soybean acreage would be 7.4 million acres (10 percent) above last year’s sowing campaign that was plagued by wetness. However, the present volatility of crop markets since the survey was conducted in early March may make farmers’ intentions highly tentative.

    Planting intentions for sunflowerseed this year are also poised for a rebound. March 2020 stocks of sunflowerseed are at a 4-year low, which has supported prices to their highest level since 2015/16. Encouraged by a comparatively strong value of the crop, farmers intend to sow 1.56 million acres of sunflowerseed—up 15 percent from 2019/20. South Dakota may show the biggest acreage gain, which now would have the most sunflowerseed acreage of any State.

    In contrast, canola planting this year may slip 2.5 percent to 1.99 million acres. Existing supplies of canola are more plentiful, particularly in neighboring Canada, which is keeping prices near a 4-year low.

    U.S. peanut acreage is expected to expand 7 percent to 1.5 million acres. Farms in the top-producing State—Georgia—would account for 70 percent of this year’s expected gain for sown acreage.

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