According to the U.S. Department of Agriculture (USDA), 62 percent of the soybean crop was harvested as of October 16, 2016, compared to 73 percent on October 16, 2015. Wet weather over much of the soybean growing area has caused delays, but the crop condition is not a concern at this time. The condition of the crop was reported to be 74 percent good to excellent versus 64 percent good to excellent this time last year.1
On October 12, 2016, the USDA issued its crop production forecast. The soybean yield increased to 51.4 bushels per acre, which compares to 50.6 bushels per acre forecast last month. The total production continues to increase from report to report, and is now forecast to be a record 4,269 million bushels.2
The forecast soybean carryout for the September 30, 2017 stocks is 395 million bushels. While this is a more than adequate supply at crop’s end, it isn’t considered overly burdensome. The increase in carryout from the September report is just 30 million bushels, because USDA forecast an increase in soybean exports of 40 million bushels, which partially offsets the increased production forecast.3
The forecast of soybean oil domestic usage is unchanged from September, but soybean oil exports are forecast to be 25 million lbs. lower than that of the September report. Offsetting this is a lower forecast soybean oil carryover of 60 million lbs. for September 30, 2016. Soybean oil supplies from both the September and October reports are well in balance. Consequently, USDA’s forecast price for crude soybean oil free-on-board (FOB), Decatur, Illinois is unchanged from September at 30.5 to 33.5 cents per lb.3
Since the report, which was supportive—if not necessarily bullish—to soybean oil prices, palm oil prices have strengthened in global markets. This is driven by relative tightness in palm oil stocks available for sale. As the U.S. soybean harvest has progressed, the market for soybean meal weakened. Both poor international demand for U.S. soybean meal and heavy usage of dried distillers grain (a byproduct of ethanol production and a partial substitute for soybean meal, especially among swine feeders), has encouraged both speculative and commercial buying of soybean oil futures and selling of soybean meal futures.
These two factors have strengthened soybean oil prices in recent days. Prices are now at the highs seen in August and near the highs seen in April. Can soybean oil prices continue above the previous points of price resistance or will they back away?
Soybean Oil Futures4
1 U.S. Department of Agriculture. "Crop Progress."
http://usda.mannlib.cornell.edu/usda/nass/CropProg//2010s/2016/CropProg-10-17-2016.pdf. October 2016.
2 U.S. Department of Agriculture. "Crop Production." http://usda.mannlib.cornell.edu/usda/current/CropProd/CropProd-10-12-2016.pdf. October 2016.
3 U.S. Department of Agriculture. “World Agricultural Supply and Demand Estimates." http://www.usda.gov/oce/commodity/wasde/latest.pdf. October 2016.
4 CME Group. "Soybean Oil Futures Quotes Globex." http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean-oil.html. October 2016.