According to the November supply and demand forecast issued by the U.S. Department of Agriculture (USDA)1, harvested acreage of soybeans remains unchanged from the October report, and projected soybean yield increased to a new record of 52.5 bushels per acre. To add a bit of perspective for those primarily interested in soybean oil, that’s approximately 578 pounds of refined oil from every acre of soybeans harvested. The report forecast a carryover inventory of 480 million bushels of soybeans, the largest carryover since September 2007. Since the report’s release on November 9, January soybean futures are off 31 cents per bushel, about 3 percent, as of this writing.
One factor that may turn out to be supportive to soybean prices is Argentina’s soybean planting delays. It is currently planting season there, and the planting weather has been less than ideal with excessive rain in the major growing regions. In addition, the Argentine government realigned its long-standing export tax program. Previously, all agricultural products were subject to taxes applied to exports of commodities. Several months ago, these export taxes were removed from virtually all commodities other than soybeans and soybean products. This seems to have resulted in increased acres of crops such as corn and wheat, and fewer acres of soybeans. These two factors would seem to result in less competition for the U.S. relating to export markets in the upcoming 18 months.
Further supporting soybean oil prices, the USDA report forecast a lower soybean oil carryover—1,658 million pounds—versus the October report; a mere 27-day supply at the forecast usage rate, despite reducing both the forecast domestic usage and exports. Consequently, the report forecast the average year’s crude soybean oil price to be 32.5 to 35.5 cents per pound, 2 cents higher than the October forecast. Soybean oil refiners report robust business with strong demand for both edible supplies and biodiesel feedstock. Recent cash prices for fully refined soybean oil have been around 42 cents per pound. If USDA’s forecast bears out, expect fully refined soybean oil to trade at 40 to 45 cents per pound this year.
1 U.S. Department of Agriculture. "World Agricultural Supply and Demand Estimates Report."
http://www.usda.gov/oce/commodity/wasde/index.htm. November 2016.
2 CME Group. "Soybean Futures Quotes." http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean.html. November 2016.