Large supplies maintain pressure on soybean prices05/10/2017 | Economics, Weather
Soybean demand is stronger than ever and will continue to grow, but monster supplies — compounded by a record number of acres being planted in the United States — will be a drag on the market, according to today’s U.S. Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates Report.
Analysts and farmers say record U.S. soybean crush, exports and dwindling ending stocks this marketing year could trigger price rallies if the weather significantly delays planting and crop emergence in major crop-producing states. However, record production in South America and a glut of beans worldwide overshadows robust demand, experts say.
July soybeans closed today at $9.70 on the Chicago Board of Trade, down 4 cents from the opening bell but 15 cents higher than the average farm price projected by the USDA for the 2016/17 marketing year.
“The soybean market has held up remarkably well,” said Rolland Schnell of Newton, Iowa Soybean Association president. “The domestic crush industry is healthy and exports are strong, which verifies that soybean checkoff programs to build demand are working.”
The report projects 2016/17 U.S. soybean exports at 2.05 billion bushels, up 25 million from last month. Domestic crush is pegged at nearly 1.93 billion bushels, an increase of 15 million from April. Ending stocks for the 2016/17 marketing year dropped 10 million bushels to 435 million, according to the report.
“Depending on the weather and if Brazilian farmers continue to hold back beans, there may be future marketing opportunities,” Schnell said.
This year’s soybean crop is projected at 4.25 billion bushels, down 52 million bushels from last year’s record. Nationwide yields are forecast at 48 bushels per acre, 4 bushels less than last year, which more than offset a higher harvested area pegged at 88.6 million acres. With sharply higher beginning stocks, soybean supplies are estimated at nearly 4.72 billion bushels, up 4 percent from 2016/17.
U.S. soybean crush is projected at 1.95 billion bushels and exports are forecast at 2.15 billion bushels, up 25 million and 100 million bushels, respectively, from the current marketing year. Ending stocks are forecast at 480 million bushels, up 45 million from the revised 2016/17 estimate.
“It is good to see that given all the added acres, ending stocks are only projected to be up 45 million more than where they are today,” said Mike North, president of Commodity Risk Management Group of Platteville, Wisconsin. “That’s a big deal. But at the same time, we have this massive South American crop that still hangs over our head. That’s going to be a problem and that’s why this market is torn even today.”
Brazil’s soybean harvest is expected to tally nearly 4.1 billion bushels, an all-time high. Global soybean ending stocks are projected at more than 3.3 billion bushels this marketing year.
“The overarching story in this market — whether you’re talking corn, beans or even wheat — is that global supplies continue to be bulky,” said North, who provides marketing services to clients in Iowa and the Midwest.
The government predicts the 2017/18 season-average soybean price range to be $8.30 to $10.30 per bushel.
In the near-term, analysts say positive crush margins and continued strong sales to China is good news for U.S. farmers.
“We’re looking at export numbers that continue to grow compared to the year prior. That extra 100 million bushels is a favorable trend,” North said.
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