KSU Soybean Market Outlook in March 2016 – Questions of 2016 U.S. Soy Acreage, Production, and Market Prospects Lay Ahead

An analysis of U.S. and World soybean supply-demand factors and 2016-2017 price prospects following the USDA’s March 9th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports either is available on the KSU AgManager website (http://www.agmanager.info/default.asp).  The results of the USDA 2016 Agricultural Outlook Forum in Arlington, Virginia on February 2015-26, 2016 are also included.

Following is a summary of the article on Soybean Market Outlook – with the full article and accompanying analysis available on the KSU AgManager website on Tuesday, March 22, 2016 at the following web address http://www.agmanager.info/marketing/outlook/newletters/Soybeans.asp

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Summary

Overview

Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on March 9th, soybean futures prices have moved higher.  Soybean market prices in the U.S. and World are limited by the current “large crop – low price” scenario, caused by consecutive record 2014, 2015 and projected 2016 South American and U.S. soybean crops.  The current market oversupply situation is illustrated by 28% growth in World soybean stocks from 61.7 mmt (22.4% stocks/use) in the 2013/14 marketing year up to 78.9 mmt (25.0% stocks/use) in the “current crop” 2015/16 marketing year.  To make matters worse for U.S. soybean producers, the high value of the U.S. dollar comparison to the relatively low value of the currencies of foreign soybean export competitors in South America has put U.S. soybeans at a decisive competitive disadvantage in soybean trade.

Since no major, widespread production problems have apparently come about in regard to the 2016 South American soybean crop prospects, World soybean markets will turn their attention to the United States to see if any soybean production shortfalls develop in the spring-summer of 2016 that could alter the current “large supply” “buyer’s market” situation that currently exists in World soybean markets.

Longer term, since MY 2008/09 the strong upward trend in World soybean production (up 7.3% annually) has “out-paced” the increase in World soybean use (up 6.0% per year), leading to record World soybean ending stocks and growth in percent ending stocks-to-use, and consequently to a dramatic reduction in soybean price prospects in the “current” and anticipated “next” crop years.  Absent major unforeseen crop production problems in the U.S. and South America in year 2016, low prices and poor profitability are likely to cause either a scaling back or “leveling” of World soybean production in 2017 and beyond.

USDA U.S. Soybean Forecast of “Current Crop” MY 2015/16

The USDA forecast 2015 U.S. soybean production of a record 3.929 billion bushels (bb) – up marginally from the 2014 previous record of 3.927 bb.  For “current crop” 2015/16, USDA projected U.S. total supplies at a record 4.150 bb (vs 4.052 bb in MY 2014/15), crush at 1.870 bb, exports at 1.690 bb (down from the record 1.843 bb in “old crop” MY 2014/15), total use at 3.690 bb (vs record of 3.862 bb in “old crop” MY 2014/15), and ending stocks at a 9 year high of 460 mb (up from 191 million bushels or ‘mb’ in “old crop” MY 2014/15).   Ending stocks-to-use are projected at 12.47% – up dramatically from 4.95% in “old crop” MY 2014/15, and the record low of 2.65% in MY 2013/14.  The USDA forecast “current crop” MY 2015/16 prices to be in the range $8.25-$9.25 (midpoint = $8.75 /bu) – down from $10.10 in “old crop” MY 2014/15, $13.00 in MY 2013/14, and the record high of $14.40 in MY 2012/13.

USDA Forecast for “Next Crop” MY 2016/17

At the USDA Agricultural Outlook Conference in Arlington, VA on February 25-26, the USDA forecast of U.S. soybean supply-demand and prices for the “next crop” 2016/17 marketing year beginning September 1, 2016.   The USDA projected 2016 U.S. soybean plantings of 82.500 million acres (ma) – down 150,000 acres from 2015.  Forecast 2016 harvested acres of 81.600 ma would be down 249,000 acres vs 2015.  With projected yields of 46.7 bu/ac, 2016 U.S. soybean production is projected to be 3.810 billion bushels (bb) – 3rd highest on record behind 3.927 bb in 2014 and 3.929 bb in 2015.   With forecast “next crop” MY 2016/17 total use of 3.850 bb (2nd highest behind 3.862 bb in “old crop” MY 2014/15), and an adjusted projection of ending stocks of 450 mb (11.95% S/U), U.S. soybean prices are projected by the USDA to be $8.50 /bu – down from the $8.75 /bu midpoint estimate for “current” MY 2015/16.

KSU Forecast for “Next Crop” MY 2016/17

KSU projections are for 82.500 ma planted (same as USDA), 81.098 ma harvested (less than the USDA), long term trend yields for 2016 of 45.85 bu/ac, and 2016 U.S. soybean production of 3.718 bb.  Total use of 3.726 bb is down from the USDA’s projection, and includes 1.875 bb soybean domestic crush (down 25 mb vs USDA), exports of 1.725 bb (down 100 mb vs USDA), and seed and residual use of 126 mb.  Following these KSU supply and use projections, ending stocks are projected to be 472 mb (12.67% S/U), with U.S. soybean prices projected by KSU to be $8.25 /bu – down $0.25 /bu from the USDA’s early projection of $8.50 /bu for “next crop” MY 2016/17.

This KSU projection includes a deliberate $0.50 per bushel downward adjustment to account for the negative impact on U.S. soybean prices from limited or “inhibited” U.S. soybean trade prospects (caused by the high value of the U.S. Dollar)

Potential KSU 2016 U.S. Soybean “Short Crop” Scenario – 42.1 bu/ac & 3.417 Billion Bu Crop

If at least moderate U.S. soybean production stresses and challenges were to occur in the U.S. in the summer of 2016 that resulted in 2016 U.S. soybean yields averaging near 42.13 bu/ac (i.e., the U.S. average soybean yield over the 2007-2013 period), then using the assumptions for acres from the KSU scenario presented above, a 3.417 bb U.S. soybean crop would be produced in 2016 (down nearly 400 mb from the USDA’s forecast of 3.810 bb).

Then, assuming total use of 3.726 bb (equal to the KSU projection above), ending stocks for “next crop” MY 2016/17 could decline to 181 mb (4.86% S/U).  Under this moderately short crop scenario, U.S. soybean prices are likely to increase by a substantial amount from current projections for “next crop” MY 2016/17, possibly up to $9.50-$10.00 per bushel.  Implicitly adjusting the price downward due to the high value of the U.S. Dollar and its impact on U.S. soybean trade, the “next crop” MY 2016/17 U.S. soybean price may be closer to $8.75-$9.50 /bu under this 4.86% S/U scenario.

World Corn Supply-Demand

World total supplies of 397.35 million metric tons (mmt) are projected for “current” MY 2015/16, up 4.5% from 380.2 mmt in “old crop” MY 2014/15, and up from 337.4 mmt in MY 2013/14.  Projected World soybean ending stocks of 78.9 mmt (25.0% S/U) in “current” MY 2015/16 are up marginally from 77.1 mmt (25.8% S/U) in “old crop” MY 2014/15, and from 61.7 mmt (22.4% S/U) in MY 2013/14.

World soybean supplies and ending stocks have been growing in recent marketing years, but usage have grown at a rate that percent ending stocks-to-use is lower in “current crop” MY 2015/16 (25.0%) than in “old crop” MY 2014/15 (25.8%) – a positive sign for future trends in World soybean markets.

 

https://i1.wp.com/farmprogress.com/cdfm/Faress1/author/198/2014/4/control_weeds_spring_burndown_1_635336394376912000.jpg

Contol of Weeds with Spring Burndown Herbicide Treatments (Source: http://farmprogress.com/story-control-weeds-spring-burndown-9-111481)

https://i2.wp.com/unitedsoybean.org/wp-content/uploads/2013/07/No-till_habitat_buffer_strip_Lloyd_Farm_KS.jpg

Considering No-till Soybeans (Source: http://unitedsoybean.org/article/no-till-and-soybean-yields/)

https://i1.wp.com/www.kgs.ku.edu/Extension/KSplaces/jpegs/Cedarbluff.jpg

Cedar Bluff Reservoir, Near Wakeeney, Kansas (Source:http://www.kgs.ku.edu/Extension/KSplaces/visit17.html )

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