Oil Crops Outlook: Higher Soybean Prices Led by Lower Supply, Brisk Export Sales

Soybean harvest. ©Debra L Ferguson

Based on dry August conditions for several States, USDA’s Crop Production report forecast the national average soybean yield down to 51.9 bushels per acre from 53.3 bushels last month. Consequently, USDA scales back the 2020/21 soybean crop by 112 million bushels to 4.313 billion. With USDA’s forecasts of 2020/21 soybean demand unchanged this month, the entire supply reduction cuts the outlook for season-ending stocks by 150 million bushels to 460 million. USDA’s forecast of the 2020/21 average farm price is raised to $9.25 per bushel from $8.35 last month.

Domestic Outlook

Untimely August Dryness Curtails Midwestern Soybean Yields

The bright promise of the nation’s 2020/21 soybean crop was tarnished a bit over the last month. Since July, much of western Iowa has endured below-average precipitation. Drought quickly spread eastward through the State in August, with less than half of the usual monthly rainfall. It was the third driest August for Iowa since 1895. As much as 80 percent of topsoil moisture in Iowa is now rated from very poor to poor.

It is exceptionally unfortunate timing as the period is when the majority of soybean pod development occurs. Between July 12 and August 30, the worsening stress on Iowa soybean crops from drought culminated in a plunge for the percentage rated in good-to-excellent condition from 83 percent to 50 percent. Moreover, a severe mid-August windstorm tore through the middle of the State.

Extensive damage was done to Iowa corn crops, but soybeans are less prone to injury from high winds and the yield toll on the latter was minimal. USDA conducted a resurvey of expected harvested acreage in Iowa for soybeans but made no revision to the estimate.

USDA’s Crop Production report forecast the national average soybean yield down to 51.9 bushels per acre from 53.3 bushels last month. While this month’s biggest crop reduction is for Iowa, a similar absence of August rainfall also lowered yields for Illinois, Nebraska, Kansas, and Missouri. In contrast, record soybean yields are anticipated in Minnesota, Kentucky, and Tennessee after each State benefited from better than average August rainfall.

Supply and Demand Changes Strengthen Market Prices

Lower crop yields this month are expected to scale back the 2020/21 soybean crop by 112 million bushels to 4.313 billion. Beginning soybean stocks are also trimmed 40 million bushels on account of increases for 2019/20 exports and domestic use. With USDA’s forecasts of 2020/21 soybean demand unchanged this month, the entire supply reduction cuts the outlook for season-ending stocks by 150 million bushels to 460 million.

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A recent rally in soybean prices reflects the yield deterioration as well as an acceleration of export sales. As of September 3, U.S. export sales commitments of soybeans total 29.9 million metric tons (1,098 million bushels). Exporters have booked record high sales for this date that are nearly four times the level of a year earlier. Revitalized U.S. sales to China are primarily responsible for the gains. A resurgence in soybean exports is forecast for 2020/21 to 2.125 billion bushels from a revised 1.68 billion in 2019/20.

USDA’s forecast of the 2020/21 average farm price is raised to $9.25 per bushel from $8.35 last month. Higher values are anticipated for soybean meal and soybean oil, also. Price forecasts for 2020/21 are raised by $25 per short ton to $315 for soybean meal and by 2 cents per pound to 32 cents for soybean oil.

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