The U.S. Department of Agriculture (USDA) presented the trade with a surprise increase over last month’s soybean crop production projection: it is now set to reach 4.2 billion bushels. This was above the largest trade prediction for this report, and soybean futures prices took an immediate hit. At the time of this writing on September 12, 2016, November soybean futures were trading at $9.595—down $0.2075 for the day—after opening and trading higher earlier in the trading session.
Soybean oil, which was trading on the defensive all day, also took a sharp drop to $0.3275—down $0.0062 for the day.
Soybean Oil Futures2
The USDA’s supply and demand forecast of the soybean complex presented a mixed picture. While the soybean crop is expected to be very large and next September’s carryover of soybeans (forecast at 365 million bushels) is somewhat burdensome, the USDA reduced the September 30, 2017 forecast of soybean oil stocks. As a result of an increase in food use of soybean oil and reduction in the soybean oil yield from domestic crushing, next year’s soybean oil carryover is now forecast to be a relatively tight 1,735 million lbs., down from 1,755 million lbs. forecast last month and 1,810 million lbs. forecast for September 30, 2016.3
The USDA projects the range of soybean prices through August 2017 to be $8.30-$9.80, down 5 cents per bushel from last month’s projection; and soybean oil prices to be $0.3050-$0.3350, up 1 cent per lb. from last month. At this point, we should expect a huge crop with excellent demand leading to fairly narrow price ranges. However, soybean futures will remain under pressure until demand materializes.
1 CME Group. "Soybean Futures Quotes." http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean.html. September 2016.
2 CME Group. "Soybean Oil Futures Quotes." http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean-oil.html. September 2016.
3 U.S. Department of Agriculture. “World Agricultural Supply and Demand Estimates.” http://www.usda.gov/oce/commodity/wasde/latest.pdf. September 2016.