An analysis of U.S. and World soybean supply-demand factors and 2014 price prospects following the USDA’s June 11th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports can be found on the KSU AgManager website (http://www.agmanager.info/default.asp).
Following is a summary of the article on Soybean Market Outlook – with the full article and accompanying analysis to be available on by the afternoon of Thursday, June 19th on the KSU AgManager website at the following web address http://www.agmanager.info/marketing/outlook/newletters/Soybeans.asp
When the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on June 11, 2014, U.S. soybean market prices initially responded negatively, and have since move sideways-to-lower. The USDA made only small changes in its supply-demand projections for U.S. soybeans for the “new crop” 2014/15 marketing year – maintaining its expectation of a large 2014 U.S. soybean crop with sharply lower prices at harvest. The USDA also forecast that World soybean supply-demand balances will grow, as large Brazilian and Argentina crops are projected for spring-early summer 2015. Given these USDA projections, a number of key soybean market factors in “new crop” MY 2014/15 are still unknown, including a) final 2014 U.S. soybean planted acreage, b) uncertainty regarding MY 2014/15 U.S. and South American soybean production prospects should an El Nino-related weather pattern occur in late 2014 as is now forecast, and c) the potential impact of geopolitical conflicts in the Black Sea Region and the Middle East on commodity markets.
USDA U.S. Soybean Supply-Demand Forecast
The USDA maintained is projection of sharply higher U.S. soybean production, higher usage, a large increase in U.S. soybean ending stocks and % ending stocks-to-use, and markedly lower prices in “new crop” MY 2014/15 versus a year earlier. The USDA’s projected “new crop” MY 2014/15 scenario is: 81.5 million acres (ma) planted, 80.5 ma harvested, 99.2% harvested-to-planted acres, record high 45.2 bu/ac U.S. yields, a record 3.635 billion bushel (bb) 2014 U.S. soybean crop, 3.775 bb total supplies, 1.625 bb exports, 3.450 bb total use, 325 million bushel (mb) ending stocks, 9.4% ending stocks-to-use, and $10.75 average price per bu. (range of $9.75 to $11.75). If actual 2014 U.S. soybean production is less than this projection, then price prospects could improve considerably. Ending stocks balances for “current” MY 2013/14 are extremely “tight” at 125 mb (down 5 mb), with a record low 3.68% % ending stocks-to-use.
U.S. Soybean Field in 2012 (Source: http://openmarkets.cmegroup.com/)
KSU U.S. Soybean Forecast for “New Crop” MY 2014/15
Kansas State University projections of “next crop” MY 2014/15 supply-demand balances and prices are as follows: a) “Likely Production” Scenario: 60% prob. of 81.5 ma planted, 98.7% harvested, expected yield of 43.0 bu/ac, 3.460 bb 2014 U.S. production, 3.605 bb U.S. total supplies, 1.550 bb exports, 3.345 bb total use, 260 mb ending stocks, 7.8% S/U, & $10.00 /bu; b) “High Production” Scenario: 20% prob. of 83.1 ma planted, 98.7% harvested, yields of 44.3 bu/ac, 3.636 bb 2014 U.S. production, 3.776 bb U.S. total supplies, 1.650 bb exports, 3.465 bb total use, 311 mb ending stocks, 9.0% S/U, & $9.75 /bu., and c) “Low Production” Scenario: 20% prob. of 79.9 ma planted, 98.7% harvested, low yields of 39.0 bu/ac, 3.076 bb 2014 U.S. production, 3.231 bb U.S. total supplies, 1.350 bb exports, 3.095 bb total use, 136 mb ending stocks, 4.4% S/U, & $15.00 /bu.
World Soybean Supply-Demand
World Soybean Total Supplies of 367 mmt in “new crop” MY 2014/15 are up from 341 mmt in “current year” MY 2013/14, and up from 321 mmt in MY 2012/13. Projected World soybean ending stocks of 82.9 mmt (29.5% S/U) in “new crop” MY 2014/15 are up from 67.2 mmt (22.7% S/U) in “current year” MY 2013/14, and up from 57.0 mmt (22.0% S/U) in MY 2012/13. Forecast total MY 2014/15 soybean production for major export competitors Brazil (91.0 mmt – up 3.5 mmt) and Argentina (54.0 mmt – unchanged) is projected to be 7.7% higher in the coming year – with harvests available for use in the early months of 2015 to compete with the U.S. in World grain export markets. These projections are still uncertain given the possibility of a strong El Nino event beginning in mid-2014 which could affect both U.S. and South American crop prospects in 2015.
A Panamax Ocean Vessel Such As Is Used to Ship Soybeans to China (Source: http://www.shippingtribune.com/)
U.S. & World Soybean Market Outlook for 2014-2015
U.S. soybean prices thus far in 2014 have been supported by continued Chinese demand and uncertainty about 2014 crop production prospects in the United States. Price weakness or at least “moderation” in soybean prices is likely to occur in the late spring-summer of 2014 IF the record large 2014 South American soybean crop is moved into export channels in a timely-efficient manner, and if prospects develop through the summer months for a large 2014 U.S. soybean crop to be produced.
There have been two successively larger record years of combined Brazil and Argentina soybean supplies, i.e., 131.3 million metric tons (mmt) in MY 2012/13, and 141.5 mmt for “current” MY 2013/14. Now in the May and June WASDE reports the USDA has projected that combined soybean production for these two countries will be even higher in “new crop” MY 2014/15 – up to 145.0 mmt, which would be up 10.4% over the three year period. This compares to U.S. soybean production of 82.6 mmt in MY 2012/13, 89.5 mmt in “current” MY 2013/14, and a projected amount of 98.9 mmt in “new crop” MY 2014/14 – up 19.8% over the same three year period. Also, the key market demand “driver” of Chinese soybean imports were estimated to be 59.9 mb in MY 2012/13, and 69.0 mb in “current” MY 2013/14, and are projected to be 72.0 mb in “new crop” MY 2014/15 – up 20.3% over the same three marketing years.
It is widely acknowledged by soybean market analysts that continued growth and/or at least sustainability of Chinese soybean imports at current and projected levels by the USDA is necessary for continuance of the historically high World soybean prices that have occurred since the 2012/13 marketing year. Rumors exist of slowing Chinese soybean import demand due to swine industry production problems or other economic or financial factors. However, given the information available to the USDA at this time, the agency has projected a continuance of the strong growth trend in Chinese imports in “new crop” MY 2014/15 in its May and June WASDE reports. If this recent upward trend in Chinese soybean imports were to falter for whatever reason, it could have a substantial negative impact on U.S. and World soybean market prices.
The timing and availability of the bulk of exportable South American soybean supplies will be a key market factor for the remainder of 2014. This year will the Brazilian export system be able to handle large supplies of soybeans, corn and other products in a more efficient and timely manner than occurred in 2013? At present there are fewer reports of logistical problems occurring in South American ports than a year ago. Both USDA and KSU price forecast scenarios for soybeans assume that there will be continued strength of soybean import demand from China and elsewhere – and that there will be an avoidance of South American grain export logistical problems of the same degree as occurred a year ago.
In conclusion, U.S. soybean prices thus far in 2014 have been supported by continued Chinese export demand and at least some uncertainty to date regarding 2014 crop production prospects in the United States. Price weakness or at least “moderation” in soybean prices is likely to occur in the late spring-summer of 2014 IF what is shaping up to be a record high 2014 South American soybean crop is moved into export channels in a timely-efficient manner, and if prospects develop through the summer months for a large 2014 U.S. soybean crop to be produced.
Soybean Harvest in Michigan in 2013 (Source: http://www.monroenews.com/)