• 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

    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.

    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.

  • Projections Remain Excellent for the Growing Soybean Crop

    August 25, 2016 10:20 PM

    The U.S. Department of Agriculture (USDA) released its latest crop production projections on August 12, 2016, and soybean production is forecast to reach 4.06 billion bushels—a new record. The estimated yield per acre, 48.9 million, and acres for harvest, 83 million, break previous records.1 While these totals are very large, the futures markets reacted very moderately.  

    A reason for this mild reaction was undoubtedly the forecast 2015-2016 soybean carryout of 255 million bushels versus the previous month’s forecast of 350 million bushels. In the minds of traders, the current year’s relative tightness fairly offsets the forecast abundant supply of new crop. Increases in this year’s domestic crush (up 10 million bushels) and exports (up 85 million bushels) both contributed to the lower carryout forecast, but exports were the primary factor.2

    The forecast soybean oil carryout for 2015-2016 was reduced from 2,275 million lbs. to 1,950 million lbs., even with the slightly higher forecast domestic crush. This reduction in stocks was the result of a 150 million lb. increase in both forecast biodiesel feedstock and edible usage. Nevertheless, the reactions of both soybean oil and soybean meal futures were equally moderate as that of soybean futures.

    The USDA forecasts price ranges for soybeans and products, as well as supply and demand estimates/projections, in its monthly World Agricultural Supply and Demand Estimates (WASDE) report. This report forecast soybean oil prices to be $0.2950 to $0.3250 per lb. next crop year—unchanged from the July WASDE report. The forecast midpoint ($0.3100) is up 1.5 cents per lb. from this year’s average price.

    1. USDA. National Agricultural Statistics Service. http://usda.mannlib.cornell.edu/usda/current/CropProd/CropProd-08-12-2016.pdf. August 12. 2016. 
    2. USDA. World Agricultural Outlook Board. http://www.usda.gov/oce/commodity/wasde/latest.pdf. August 12. 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...