Oil Crops Outlook: Demand for Domestic Soy Meal Use, Oil Exports Stays Robust

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The U.S. soybean crush for 2019/20 is expected 15 million bushels higher this month to a record 2.14 billion. The increase is based on continuing gains for domestic use of soybean meal, which is seen 400,000 short tons higher to 37.5 million. USDA also raised its forecast of soybean oil exports for 2019/20 by 150 million pounds to 2.7 billion. In contrast, USDA trimmed its 2019/20 forecast of U.S. soybean exports this month by 25 million bushels to 1.65 billion. This month’s revisions boost the forecast of 2019/20 season-ending stocks by 5 million bushels to 585 million.

Domestic Outlook

Soybean Planting in 2020/21 Proceeds Well

In sharp contrast to a year ago, when planting of the 2019/20 soybean crop was long delayed by excessively wet soil conditions, fieldwork this spring is advancing more smoothly. As of June 7, planting was 86 percent complete for the 2020/21 U.S. soybean crop.

While the pace is moderately ahead of the 5-year average at 79 percent, it is well ahead of the 54 percent sown a year ago. An exception is North Dakota, where spring planting progress has been slowed by wet weather and cold temperatures.

Most of the Midwestern soybean-growing region starts the season with generally abundant soil moisture for germination. Although most soybean seedlings have only recently emerged from the soil, crop conditions for early June are widely favorable.

Outlook for 2019/20 Soybean Crushing Stays Bright

The U.S. soybean crush for 2019/20 is expected 15 million bushels higher this month to 2.14 billion based on continuing gains for domestic use of soybean meal. In April, processor demand for soybeans tapered off slightly with a decline to 183.4 million bushels from 192.2 million in March. Nevertheless, it was a record for the month. Soybean crushing for September 2019–April 2020 is 1.45 billion bushels—nearly 3 percent ahead of last season’s record.

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USDA forecasts the 2019/20 domestic disappearance of soybean meal 400,000 short tons higher this month to 37.5 million. Cumulative use of soybean meal for the season to date is up nearly 5 percent from the 2018/19 pace. Despite strong demand, a brisk production pace has sustained pressure on soybean meal prices. The 2019/20 average price for soybean meal is forecast down this month by $5 per short ton to $295.

U.S. exports of soybean oil are turning in one of the best performances in a decade. In May, export shipments of soybean oil may be a near record for the month. U.S. trade in the commodity is benefiting from stronger sales to Latin America and North Africa. Typically, these import markets are dominated by Argentine soybean oil exports but those have been slower to accelerate this year. Consequently, USDA raised its forecast of soybean oil exports for 2019/20 by 150 million pounds to 2.7 billion.

Higher domestic demand for soybeans, however, is being more than offset by dimmer prospects for foreign trade. USDA trimmed its 2019/20 forecast for U.S. soybean exports this month by 25 million bushels to 1.65 billion. Aside from these changes in demand, a USDA resurvey of North Dakota crop producers shaved 4 million bushels off the 2019/20 harvest to 3.552 billion. Overall, the revisions boost the forecast of season-ending soybean stocks by 5 million bushels to 585 million.

For the new crop year of 2020/21, a 15-million-bushel increase for the crush (to 2.145 billion) more than offsets the slight increase for beginning stocks. Thus, the forecast of 2020/21 season-ending stocks dips by 10 million bushels to 395 million.

Government Aid to Relieve Market Price Slide

In April, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act, which authorizes $9.5 billion in funding to compensate for economic losses related to the pandemic. Eligible commodities include those that suffered a 5-percent or greater decline in market price or disrupted market chains between mid-January and mid-April.

The legislation also raises borrowing authority for USDA’s Commodity Credit Corporation (CCC) by $14 billion to compensate for income losses—with $6.5 billion of prior authority available for immediate disbursement. The higher CCC spending cap may prove vital if marketing year average prices for 2020/21 crops stay depressed, as that could inflate producer payments under either the Agricultural Risk Coverage (ARC) or Price Loss Coverage (PLC) programs.

USDA will administer the funds through its Coronavirus Food Assistance Program (CFAP). Direct cash payments under CFAP apply only to inventories that were unsold or uncontracted as of January 15 or were half of a producer’s certified 2019 production, whichever is less.

In the case of soybeans, eligible producers would receive a single payment (in two installments) comprising half of their inventory at a CARES Act payment rate of 45 cents per bushel and the other half at a CCC payment rate of 50 cents per bushel. The CFAP payments do not affect the level of payments under other programs, including ARC/PLC payments, trade aid under the Market Facilitation Program (MFP), or disaster assistance from the Wildfire and Hurricane Indemnity Plus (WHIP+).

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