• Projected Soybean Yield Reaches Record Bushel per Acre

    November 30, 2016 5:56 PM

    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.

    Soybean Futures2

    November_Market Updates Graph

    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.

    References
    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.

  • Excellent Weather For The 2016 Soybean Crop Continues Into Harvest

    November 04, 2016 6:38 PM

    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.

    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

    October Market Updates Graph

    References
    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.

  • Soybean Crop Projections Exceed Previous Record

    September 28, 2016 7:10 PM

    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 Futures1
    September Soybean Futures Graph
    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

    September Soybean Oil Futures Graph

    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.

    References
    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.

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Richard GallowayAbout the Expert

Richard Galloway is president of Galloway and Associates, LLC, a business consulting firm serving domestic and foreign agricultural processing, vegetable oil refining, biodiesel and grain handling industries. Galloway is a consultant to the QUALISOY Board, a collaborative effort among the soybean industry to help market the development and availability of trait-enhanced soybean oils, including high oleic soybean oil. Read More...