KSU Soybean Market Outlook in Late-March 2018 – New Soybean S-D and Price Expectations for “New Crop” MY 2018/19

An analysis of U.S. and World soybean supply-demand factors and 2018-2019 price prospects following the USDA’s March 8th World Agricultural Supply Demand Estimates (WASDE) report, and the March 29th USDA Prospective Plantings and Grain Stocks reports will be available 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 April 2, 2018 on the KSU AgManager website at the following web address:

http://agmanager.info/grain-marketing/grain-market-outlook-newsletter

************************.

Summary

A. Some Perspective on the World Soybean Market

Since 2014, World soybean market prices have been declining in response to the “large crop – low price” supply-demand regime that has been caused by consecutive record World soybean production years for 2014 through 2017, with large crops regularly occurring in South America and the United States.  Strong demand for soybean imports from China, Japan, and other Asian countries have supported World soybean prices.

Longer term, from MY 2007/08 to “old crop” MY 2017/18, this strong upward trend in World soybean production (up 5.6% annually) has “out-paced” increases in World soybean use (up 5.0% per year).  As long as growth in World soybean production continues to outpace World soybean usage, then World soybean stocks will remain at high levels with prices continuing at their current “moderate” levels – being affected positively be ongoing strength in demand, but held “in check” by more than adequate world supplies.  

B. China-U.S. Trade Tensions

The potential for soybean market disruptions from trade policy-related confrontations between the U.S. and China has emerged as an issue in early 2018.  These economic – geopolitical tensions so far have not resulted in official direct tariffs or import limitations by China on U.S. soybeans.  However, it is reported that Chinese buyers of soybeans have responded by aggressively pursuing Brazilian soybean imports, and to a degree have at least moderated their purchases of U.S. soybeans in recent months.  So, although no official action has been taken by China against U.S. soybean imports, such tensions have to a degree already affected U.S. soybean trade by “pressuring” Chinese buyers to redirect their buying focus toward Brazil, Argentina, Paraguay, and wherever else globally they can secure soybean and oilseed products.

C. Soybean Market Response to the March 8th & 29th USDA Reports

Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on March 8th soybean futures prices had moved primarily lower.  From the March 8th close of $10.64, CME MAY 2018 Soybean futures prices have traded from a high of $10.63 on 3/9/2018 down to a low of $10.09 ¼ on March 23rd, before closing at $10.18 on Wednesday, March 28th – the day prior to the USDA Quarterly Stocks & Prospective Plantings reports on March 29th.  Then on the day of the March 29th USDA reports, CME MAY 2018 Soybean futures responded positively, trading from a low of $10.12 ½ to a high of $10.50 ¾ before closing at $10.44 ¾ – up $0.26 ¾ per bushel for the day.

Kansas cash soybean prices at terminals in central and eastern Kansas ranged from $9.42 ¾ to $9.89 ¾ /bu on March 29th – with basis ranging from $1.02 under to $0.60 under MAY 2018 Soybean futures.  That same day in western Kansas, major grain elevator bids ranged from $9.10 to $9.45 per bushel – with basis ranging from $1.35 under to $1.00 under. 

D. World Soybean Supply-Demand Findings in the March 8th WASDE USDA Report

On March 8th for the “old crop” 2017/18 marketing year (MY) to end on August 31, 2018, the USDA projected the following.

First, that World soybean total supplies would be 437.5 million metric tons (mmt) (down 3.0%) with total use of 34.8 mmt (up 4.2%) for “old crop” MY 2017/18. With supplies moving lower and demand increasing, there has been a moderate “tightening” of projected World ending stocks of soybeans. 

Second, that World soybean exports will continue trending higher – up to a record high to 150.6 mmt in the “old crop” 2017/18 marketing year.  This amount of World soybean exports of 150.6 mmt in “old crop” MY 2017/18 would be up from previous records of 147.5 mmt last year, and 132.6 mmt two years ago.   World soybean exports have been growing annually at a 9.1% rate since the 2007/08 marketing year.

Third, that World soybean ending stocks would be a 94.4 mmt in “old crop” MY 2017/18 – down from the record high of 96.65 mmt in MY 2016/17, but still up from 78.3 mmt in MY 2015/16.  Overall, World soybean ending stocks have grown at an 8.0% rate annually since the 2007/08 marketing year.

Fourth, that World soybean percent ending stocks-to-use (% S/U) would be 27.5% – the 2nd highest on record but down from the record high of 29.3% last year, while being up from 24.9% and 25.7% the two years prior.

E. U.S. Soybean Supply/Demand for “Old Crop” MY 2017/18 & “New Crop” MY 2018/19

The USDA released their soybean production, supply-demand and price projections for the U.S. for “old crop” MY 2017/18 in the March 8th WASDE report, for “new crop” MY 2018/19 in its February 23rd USDA Ag Outlook Forum projections, for 2018 planted acres in the March 29th Prospective Plantings report, and for November-February 2018 usage of U.S. soybeans and March 29th Grain Stocks report.   

U.S. soybean plantings are forecast to be 88.982 million acres (ma) in 2018, down from 90.142 ma in 2017, and 83.433 ma in 2016.  Harvested acres are forecast by Kansas State University to be 88.222 ma in 2018 (99.15% harvested-to-planted – latest 5 year average), down 1.45% from 89.522 ma in year 2017, but up 6.7% from 82.696 ma in 2016. 

The 2018 U.S. average soybean yield is forecast at 48.5 bu/ac, down from a KSU-adjusted estimate of 49.79 bu/ac in 2017, and from the 2016 record of 52.0 bu/acre.  This KSU adjustment to the most recent official USDA estimate on March 8th was made following the March 29th grain stocks report.  The USDA estimate of March 1, 2018 U.S. soybean stocks came in approximately 65 mb larger than trade estimates. Given that estimates of U.S. soybean domestic crush, exports, and seed use for the November-February 2018 quarter are known with some accuracy, it seems that the unexplained increase in U.S. soybean stocks on March 1st may be due to the USDA underestimating the size of the 2017 U.S. soybean crop. 

As a result, if 2017 soybean planted and harvested acreage are left unchanged, and 65 mb is added to the size of the 2017 U.S. soybean crop, then this KSU-adjusted estimate of 2017 U.S. soybean yields is raised to 49.79 bu/ac – up from the latest USDA’s official 2017 U.S. soybean yield  estimate of 49.1 bu/ac.

Soybean production in the U.S. in 2018 is forecast to be 4.279 billion bushels (bb), down from the KSU-adjusted record high of 4.457 bb in 2017 (vs the latest USDA estimate of 4.392 bb – see discussion above), but up from 4.296 bb in 2016.  After these adjustments, projected “new crop” MY 2018/19 U.S. soybean total supplies are forecast at 4.924 bb, up from a KSU-adjusted 4.783 bb in “old crop” MY 2017/18, and from 4.515 bb in MY 2016/17.  Record high U.S. soybean total use of 4.415 bb is forecast for “new crop” MY 2018/19, up from 4.163 bb in “old crop” MY 2017/18, and from 4.213 bb in MY 2016/17. 

With previously mentioned changes in 2017 U.S. soybean production resulting from the outcome of the March 29th Grain Stocks report, the KSU-adjusted USDA projection for “new crop” MY 2018/19 U.S. soybean ending stocks equals 509 million bushels (mb) (11.52% stocks/use), down from a KSU-adjusted estimate of 620 mb in “new crop” MY 2017/18 (14.89% stocks/use), but up from 302 mb in MY 2016/17 (7.17% stocks/use).  

United States’ soybean prices are projected to average $9.40 /bu in “new crop” MY 2018/19, up from $9.30 /bu in “old crop” MY 2017/18, but down from $9.47 in MY 2016/17, and comparable to $8.95 /bu in MY 2015/16, and $10.10 /bu in MY 2014/15.   It is estimated by Kansas State University that these KSU-adjusted USDA projections for “new crop” MY 2018/19 have a 55% probability of occurring.

F. Two Alternative KSU U.S. Soybean S/D Forecasts for “New Crop” MY 2018/19

To represent possible alternative outcomes from the KSU-adjusted USDA February 23rd projection for “new crop” MY 2018/19, two potential KSU-Scenarios for U.S. soybean supply-demand and prices are presented.   

KSU Scenario 1) “HIGHER 2018 U.S. Soybean Production” Scenario for “new crop” MY 2018/19 (25% probability): 

88.982 ma planted, 99.15% harvested-to-planted, 88.222 ma harvested, 52.0 bu/ac average yield, 4.588 bb production, 5.233 bb total supplies, 2.350 bb exports, 2.000 bb domestic crush, 135 mb seed & residual use, 4.485 bb total use, 748 mb ending stocks, 16.68% Stocks/Use, & $8.50 /bu U.S. soybean average price.

KSU Scenario 1) “LOWER 2018 U.S. Soybean Production” Scenario for “new crop” MY 2018/19 (20% probability): 

88.982 ma planted, 99.15% harvested-to-planted, 88.222 ma harvested, 42.0 bu/ac average yield, 3.705 bb production, 4.350 bb total supplies, 2.000 bb exports, 1.960 bb domestic crush, 135 mb seed & residual use, 4.095 bb total use, 255 mb ending stocks, 6.23% Stocks/Use, & $11.00 /bu U.S. soybean average price.  

*****

Advertisements

U.S. Ethanol and Biodiesel Market-Profitability Graphics: Through Late-March 2018

Following are some graphics on U.S. Ethanol and Biodiesel Market price and profitability trends in the , which will soon be available on the KSU AgManager website:  http://www.agmanager.info/

The full presentation titled “U.S. Ethanol & Biodiesel Market Situation” made for WILL (Illinois Public Radio) on Tuesday, March 27th and will be located at the KSU AgManager.info website – at the following web address:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter

 

Following are the graphics of this presentation.

 

 

KSU Ag Econ “Soybean and Cotton Market Outlook for 2018” Presentation

Following is a presentation on “Soybean & Cotton Market Outlook for 2018”.  This information was given as part of a larger “Grain Market Outlook for 2018” presentation given by Kansas State University Extension Agricultural Economist Daniel O’Brien at a Farming for the Future meeting in Pratt, Kansas on December 14, 2017.

Additional Farming for the Future conferences in Kansas are planned for December 19th in Salina, January 10th in Scott City, and January 11th in Emporia.  Registration information can be found at the following web address:

http://www.agmanager.info/events/farming-future

****

The full “Grain Market Outlook for 2018” presentation is available online at the KSU AgManager website at the following web address:

http://www.agmanager.info/sites/default/files/pdf/AGEC520_GrainOutlook_10-19-17.pdf

Information on Wheat, Soybean & Cotton supply-demand and market outlook will be provided in succeeding posts.

Following is information on “Soybean and Cotton Market Outlook for 2018”:

 

U.S. Ethanol and Biodiesel Market-Profitability Graphics: Through Late-November 2017

Following are some graphics on U.S. Ethanol and Biodiesel Market price and profitability trends in the , which will soon be available on the KSU AgManager website:  http://www.agmanager.info/

The full presentation titled “U.S. Ethanol & Biodiesel Market Situation” made for WILL (Illinois Public Radio) on Tuesday, November 28th and will be located at the KSU AgManager.info website – at the following web address:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter

Kansas & Illinois Ethanol Plant Location, Ethanol Production Capacity & Corn Usage

This presentation also includes maps with locations of ethanol plants in and near the states of Kansas and Illinois – including location, ethanol production capacity by plant, and implied corn use at full plant capacity.

Following are the graphics of this presentation.

 

U.S. Ethanol and Biodiesel Market-Profitability Graphics (with KS-IL Plant Info)

Following are some graphics on U.S. Ethanol and Biodiesel Market price and profitability trends in the , which will soon be available on the KSU AgManager website:  http://www.agmanager.info/

The full presentation titled “U.S. Ethanol & Biodiesel Market Situation” was made for WILL (Illinois Public Radio) on Tuesday, November 7, 2017, and will be located at the KSU AgManager.info website – at the following web address:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter

Kansas & Illinois Ethanol Plant Location, Ethanol Production Capacity & Corn Usage

This presentation also includes updated maps with locations of ethanol plants in and near the states of Kansas and Illinois – including location, ethanol production capacity by plant, and implied corn use at full plant capacity.

Following are the graphics of this presentation.

 

U.S. Ethanol and Biodiesel Market-Profitability Graphics through 9/26/2017

Following are some graphics on price and profitability trends in the U.S. ethanol and biodiesel industries, which is available on the KSU AgManager website at the following webaddress:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter

The full presentation titled “U.S. Ethanol & Biodiesel Market Situation” was made in support of a bioenergy market update presented on WILL (Illinois Public Radio) on Tuesday, September 26, 2017.

U.S. Ethanol and Biodiesel Market-Profitability Graphics (with Kansas-Illinois Ethanol Plant Locations)

Following are some graphics on U.S. Ethanol and Biodiesel Market price and profitability trends in the , which will soon be available on the KSU AgManager website:  http://www.agmanager.info/

The full presentation titled “U.S. Ethanol & Biodiesel Market Situation” made for WILL (Illinois Public Radio) on Tuesday, August 22nd and will be located at the KSU AgManager.info website – at the following web address:

http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter

Kansas & Illinois Ethanol Plant Location, Ethanol Production Capacity & Corn Usage

This presentation also includes maps with locations of ethanol plants in and near the states of Kansas and Illinois – including location, ethanol production capacity by plant, and implied corn use at full plant capacity.

Following are the graphics of this presentation.