Menu

Soybean Supply-and-Demand Tug of War

The November 2015 soybean futures traded to a low of about $8.96 on June 15, rebounded to $10.45 on July 14, and are currently trading near $9.90. According to University of Illinois agricultural economist Darrel Good, the volatility in prices reflects the market’s reaction to generally positive supply factors and some negative demand factors.

“On the supply side, the smaller-than-expected June 1 stocks estimate resulted in the USDA lowering the projection of 2014-15 marketing year-ending stocks to 255 million bushels in the July 10 World Agricultural Supply and Demand Estimates (WASDE) report ,” Good said. “That is 75 million bushels less than projected a month earlier and 220 million bushels less than projected in the fall of 2014. The June 30 USDA Acreage report indicated that harvested acreage of soybeans this year would be about 700,000 acres more than projected based on the planting intentions reported in March.

“However, there is a general consensus that not all of the intended acreage was actually planted due to extremely wet conditions in Missouri, Illinois, Indiana, and Ohio,” Good said. “In addition, flood damage may result in more than the usual amount of abandonment of acreage that did get planted. Those same conditions are also expected to result in an average U.S. soybean yield below the projection of 46 bushels in the July 10 WASDE report. In short, the 2015 crop is expected to be smaller than the current USDA projection of 3.885 billion bushels, but expectations are in a wide range.”

The USDA will release the first survey-based production forecast in the Crop Production report to be released on August 12. That report will reflect the results of the re-survey of soybean planted and harvested acreage in a few states.

“Consumption of old-crop soybeans remains strong and on track to reach the record levels currently projected,” Good said. “The National Oilseed Processors Association reported that the crush by its members in June 2015 was 20 percent larger than in June 2014. Crush in July and August needs to be about 7.5 percent larger than that of a year earlier in order for the marketing-year crush to reach the current USDA projection of 1.83 billion bushels. With about 6.5 weeks left in the 2014-15 marketing year, exports need to average about five million bushels per week in order to reach the current USDA projection of 1.825 billion bushels. That is less than the 8.4 million bushel average of weekly export inspections for the seven weeks ended July 16. Unshipped sales of 94 million bushels as of July 9 were sufficient to supply the necessary shipments.”

Good said the concern about soybean demand centers on potential export demand for the 2015 crop. The USDA currently projects 2015-16 marketing-year exports at 1.775 billion bushels, only 50 million bushels less than the record-large exports expected of the current year.

As of July 9, the USDA reported that only about 252 million bushels of soybeans have been sold for export during the upcoming marketing year. Sales are at the lowest level for that date since 2009 and are only about half as large as the average level of sales on that date in the previous three years. Current new-crop sales represent 14 percent of the projected exports for the upcoming marketing year. In the previous three years, sales at this time of year accounted for 25 to 41 percent of the marketing-year total exports. Sales to China, by far the largest customer for U.S. soybeans, stood at only 89.5 million bushels as of July 9 this year. Sales to unknown destinations, which likely include China, totaled 120 million bushels. In the previous three years, combined sales to China and unknown destinations averaged 457 million bushels, compared to only 209.5 million bushels this year.

“It is possible that the slow pace of new-crop export sales so far this year reflects a shift away from the recent seasonal pattern of export sales back to the pattern that prevailed during the period from 2006 through 2010,” Good said. “During those five years, new- crop export sales as of about July 9 accounted for an average of only 14 percent of marketing-year exports.

“If the pattern has shifted, then sales for the upcoming marketing year are currently on track with the USDA projection,” Good said. “The concern, however, is that the slow pace of export sales so far this year may be reflecting the loss of market share to lower-priced South American soybeans. The trade, for example, has reported large export sales of South American soybeans for delivery early in the 2016 calendar year.”

The current USDA projections are for year-ending stocks of U.S. soybeans to increase from 255 million bushels this year to 425 million bushels next year. “Even if the crop is smaller than currently projected, supplies should be fully adequate to meet expected consumption during the year ahead,” Good said. “At the projected level of consumption, the crop would have to be 170 million bushels smaller than currently projected in order to prevent a buildup of stocks and 275 million bushels smaller to reduce year-ending stocks to 150 million bushels. If export demand is weaker than projected, an even smaller crop would be required before U.S. supplies were small enough to require some rationing,” he said.

Good added that confirmation of smaller U.S. production prospects in the August 12 USDA Crop Production report might result in some price strength from current levels. A combination of smaller-than-expected production and improved export sales may be required to push prices above recent highs.

Source: University of Illinois 

Recent News

Managing Nitrogen for Corn in 2020
3/25/2020

As was the case a year ago, there have been limited opportunities to apply nitrogen fertilizer since last fall. Rainfall in Illinois through the first three weeks of March has been at or above average, and temperatures have been a few degrees above normal. Soils remain wet, and there is little in the current weather […]

Time Has Run Out for EPA to Appeal 10th Circuit Biofuels Ruling
3/25/2020

Reuters writer Richard Valdmanis reported on Wednesday that, “Time has run out for the U.S. Environmental Protection Agency to challenge a federal court ruling that would limit the agency’s use of waivers exempting small oil refineries from the country’s biofuels regulations. Todd Neeley@toddneeleyDTN  The DOJ did not file an appeal with the 10th Circuit before the court deadline on the […]

Management of Defoliating Insects in Nebraska Soybeans
3/24/2020

Many defoliating insects may be found in Nebraska soybeans. Estimating defoliation levels in fields is the best way to decide whether it will pay to treat for these insects. We saw several different insects in parts of Nebraska causing defoliation in soybeans in 2019. These included: woolly bear caterpillars green cloverworms grassshoppers bean leaf beetles […]

Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now