KSU Soybean Market Outlook in Mid-September 2017 – Likelihood of Lower Production and Higher Price Outcomes

An analysis of U.S. and World soybean supply-demand factors and 2016-2017 price prospects following the USDA’s September 12th Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports either is 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 available on the KSU AgManager website at the following web address:

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

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Summary

Recent Soybean Futures Price Trends

Since the USDA’s September 12th Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports, soybean futures have increased.  CME NOV 2017 soybean futures opened at $9.60 ¾ on Tuesday, September 12th – the day of the report – then traded as low as $9.37 ½ that same day before closing $0.09 ½ lower that day at $9.50 ½.  Since then, NOV 2017 soybeans have trended “irregularly” higher to close at $9.70 ¾ on Thursday, September 21st.  

World Soybean Market Perspectives

Since 2014, World soybean market prices have been limited by a developing “large crop – low price” supply-demand regime, caused by consecutive record or near record World soybean production years for 2014 through projections for 2017.

Longer term, from MY 2008/09 to projected “new crop” MY 2017/18, a strong upward trend in World soybean production (up 7.1% annually) has “out-paced” annual increases in World soybean use (up 6.1% per year).  “Old crop” MY 2016/17 World production is estimated to have been a record high of 351.4 mmt, followed by a projection of near record World production of 348.4 mmt in “new crop” MY 2017/18.  In what is exceedingly good news for the World soybean market, total use has also increased along with production, to 329.8 mmt in “old crop” MY 2016/17, and to a projected record high of 344.3 mmt in “new crop” MY 2017/18.

The degree of “abundance” or “large quantities” in World soybean ending stocks have been a key issue leading to current “moderate-to-low” soybean prices in World markets relative to recent years.   Since World soybean ending stocks of 61.5 mmt (22.3% ending stocks-to-use or ‘S/U’) in MY 2013/14, soybean stocks grew sharply to 77.5 mmt (25.6% S/U) in MY 2014/15 and 77.7 mmt (24.7% S/U).  Then in “old crop” MY 2016/17 World ending stocks are estimated to have increased to a record level of 96.0 mmt (29.1% S/U), followed by a further increase to 97.5 mmt (28.3% S/U) in “new crop” MY 2017/18. 

A key World soybean market strategy will be to wait to figure out whether dry conditions or some other crop production malady will occur in late 2017 or early 2018 in South America that could limit 2018 soybean production in the southern hemisphere.  Although World soybean demand growth has been as strong as can be expected, it seems that a “supply shock” or “crop shortfall” in 2018 or following years would be the most likely factor to drive World soybean production and supply-demand balances low enough to alter the existing “large supply – buyer’s market” situation.  With prospects now pointing toward a near record 2017 U.S. soybean crop, World markets will turn their attention toward 2018 South American production prospects as the next major source of soybean market risk – providing the possibility of a change in paradigm and higher soybean prices in the next 12-18 months.

USDA Corn Supply-Demand & Price Forecast for “New Crop” MY 2017/18

The USDA made no adjustments in its projection of 2017 U.S. soybean plantings of a record high 89.513 million acres (ma) – up from 83.433 ma in 2016.  Forecast 2016 harvested acres of a record 88.731 ma is also up from 82.736 ma in 2016.  With near record high projected yields of 49.9 bu/ac (up 0.5 bu from August), 2017 U.S. soybean production is projected to be a record high 4.431 bb – up from 4.307 bb in 2016 (2nd highest) and from 3.926 bb in 2014.   With forecast “new crop” MY 2017/18 domestic crush at a record 1.940 bb and exports forecast to be a record 2.250 bb (up 25 mb), projected U.S. total soybean use is a record 4.326 bb – up from 4.183 bb in “old crop” MY 2016/17 and from 3.944 bb in the previous marketing year. 

Given these results, “new crop” MY 2017/18 U.S. soybean ending stocks are forecast to be an 11 year high of 475 mb (10.98% S/U), while U.S. soybean prices are forecast to be in the range of $8.35-$10.05 (midpoint = $9.20 /bu).  This U.S. soybean price forecast is down from $9.50 in “old crop” MY 2016/17, but up from $8.95 the year before.  This USDA projection scenario is thought to have a 60% probability of occurring in the judgment of Kansas State University Extension.

Alternative KSU Supply-Demand & Price Forecast for “New Crop” MY 2017/18

Three alternative KSU-Scenarios for U.S. soybean supply-demand and prices to the USDA projection are presented for “new crop” MY 2017/18.  Each forecast scenario presents the likelihood that exists of higher U.S. soybean acreage, lower yields and lower production, and higher prices than projected by the USDA in the September 12, 2017 WASDE report. 

A – KSU “New Crop” MY 2017/18 “Lower Yield” Scenario #1) “48.0 bu/ac – 4.278 bb” Scenario (30% probability) assumes: 89.901 ma planted, 89.116 ma harvested, 48.0 bu/ac yield, 4.278 bb production, 4.648 bb total supplies, 4.226 bb total use, 422 mb ending stocks, 9.99% S/U, & $9.70 /bu U.S. average soybean price; 

B – KSU “New Crop” MY 2017/18 “Very Low Yield” Scenario #2) “45.85 bu/ac – 4.085 bb” Scenario (5% probability) assumes: 89.901 ma planted, 89.116 ma harvested, 45.85 bu/ac yield, 4.085 bb production, 4.455 bb total supplies, 4.106 bb total use, 349 mb ending stocks, 8.50% S/U, & $10.20 /bu U.S. average soybean price; 

C – KSU “New Crop” MY 2017/18 “Wildcard World Event” Scenario #3) “48.0 bu/ac – 4.278 bb” Scenario (5% probability) assumes: 89.901 ma planted, 89.116 ma harvested, 48.0 bu/ac yield, 4.278 bb production, 4.648 bb total supplies, 3.861 bb total use, 787 mb ending stocks, 20.38% S/U, & $7.00 /bu U.S. average soybean price; 

Note: The presence of large beginning stocks of 345 mb in “new crop” MY 2017/18 limit the “tightness” of supply-demand balances along with prospects for a record large 2017 U.S. soybean crop of 4.431 bb (USDA). Prospects for such large supplies of soybeans hinders any upward price responses in the KSU Scenarios A, B and C above.

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“Deep Numbers” Analysis of the September 12, 2017 USDA Crop Production and WASDE Reports

A “deep numbers” analysis of the results of the September 12, 2017 USDA Crop Production and WASDE (World Agricultural Supply and Demand Estimates) reports are provided by Kansas State University.  This numbers analysis is available at the KSU AgManager.info website at the following web address:

http://www.agmanager.info/wasde-deep-numbers-analysis-spreadsheet

The September 2017 USDA Crop Production report considered and reported the conditions of major U.S. crops in early September, giving projections of final acreage, yields, and production of U.S. corn, grain sorghum, soybeans, and other crops.

The September 2017 USDA WASDE report considered projected supply-demand and price projections for U.S. crops, and supply-demand prospects for global and country-by-country analysis for the period covering the New Crop” 2017/18 Marketing Years, Old Crop” MY 2016/17, and MY 2015/16 supply-demand and price prospects.

This “deep numbers” analysis considers how the September 12th USDA Crop Production and WASDE report results compare to pre-report trade expectations, last month’s report estimates, and previous years.

World Wheat, Corn, Coarse Grain and Soybean supply demand numbers are also considered in an extended look at production, exports, imports, food-industrial and seed use (for corn and coarse grains), food use (for wheat), crush (soybeans), feed and residual use (corn, coarse grains and wheat), ending stocks, and % ending stocks to use.

Selections from this “deep numbers” WASDE report analysis are as follows:

 

 

Soybean and Cotton Market Outlook for 2017-2018 @ the 2017 KSU Risk and Profit Conference, August 18, 2017

The following information on the “Soybean and Cotton Market Outlook for 2017-2018” was presented at the 2017 K-State Risk and Profit Conference in Manhattan, Kansas on Friday, August 18, 2017.

The full version of this presentation – with additional information not presented to the conference because of time constraints – is available online at the following web address:

http://www.agmanager.info/events/risk-and-profit-conference/previous-conference-proceedings/2017-risk-and-profit-conference

Following is the full “Soybean and Cotton Market Outlook for 2017-2018” available at the 2017 K-State Risk and Profit Conference on Friday, August 18, 2017.

 

 

Wheat Market Outlook for 2017-2018 @ the 2017 KSU Risk and Profit Conference, August 18, 2017

The following information on the “Wheat Sorghum Market Outlook for 2017-2018” was presented at the 2017 K-State Risk and Profit Conference in Manhattan, Kansas on Friday, August 18, 2017.

The full version of this presentation – with additional information not presented to the conference because of time constraints – is available online at the following web address:

http://www.agmanager.info/events/risk-and-profit-conference/previous-conference-proceedings/2017-risk-and-profit-conference

Following is the full “Wheat Market Outlook for 2017-2018” available at the 2017 K-State Risk and Profit Conference on Friday, August 18, 2017.

 

 

“Deep Numbers” Analysis of the June 9, 2017 USDA WASDE and Crop Production Reports (KSU Ag Economics))

A “deep numbers” analysis of the results of the June 9, 2017 USDA World Agricultural Supply and Demand Estimates (WASDE) report is available on the Agmanager.info website from Kansas State University. The USDA June WASDE and Crop Production reports considered “next crop” 2017/18 marketing year, “current” MY 2016/17, and MY 2015/16 supply-demand and price prospects for U.S. crops, and supply-demand prospects for global and country-by-country analysis.

Results are available on the KSU AgManager.info website at the following web address:

http://www.agmanager.info/wasde-deep-numbers-analysis-spreadsheet

This “deep numbers” analysis considers how the June 9th USDA WASDE and other National Agricultural Statistics Service (NASS) numbers compare to pre-report trade expectations, last month’s report estimates, and previous years.

World Wheat, Corn, Coarse Grain and Soybean supply demand numbers are also considered in an extended look at production, exports, imports, food-industrial and seed use (for corn and coarse grains), food use (for wheat), crush (soybeans), feed and residual use (corn, coarse grains and wheat), ending stocks, and % ending stocks to use.

Selections from this “deep numbers” WASDE report analysis are as follows:

 

“Deep Numbers” Analysis of the May 10, 2017 USDA WASDE Report (D. O’Brien KSU)

A “deep numbers” analysis of the results of the May 10, 2017 USDA World Agricultural Supply and Demand Estimates (WASDE) report is available on the Agmanager.info website from Kansas State University. The May WASDE report considered “next crop” 2017/18 marketing year, “current” MY 2016/17, and MY 2015/16 supply-demand and price prospects for U.S. crops, and supply-demand prospects for global and country-by-country analysis.

Results are available at the following web address:

http://www.agmanager.info/wasde-quick-analysis-spreadsheet

This “deep numbers” analysis considers how the May 10th USDA WASDE and other National Agricultural Statistics Service (NASS) numbers compare to pre-report trade expectations, last month’s report estimates, and previous years.

World Wheat, Corn, Coarse Grain and Soybean supply demand numbers are also considered in an extended look at production, exports, imports, food-industrial and seed use (for corn and coarse grains), food use (for wheat), crush (soybeans), feed and residual use (corn, coarse grains and wheat), ending stocks, and % ending stocks to use.

Selections from this “deep numbers” WASDE report analysis are as follows:

 

Key Supply-Demand Factors “Driving” Grain Markets (KSU Extension Ag Economics)

The following presentation on “Key Supply-Demand Factors ‘Driving” Grain Markets” was given on Tuesday, March 14, 2017 to the AgEcon 605 class on “Price Analysis and Forecasting” as a guest lecture.  The class is regularly taught by Dr. Richard Llewelyn of the Kansas State University Department of Agricultural Economics.

This presentation focuses on the key factors that have been “driving” or influencing grain markets over the last 15-25 years.   The full presentation will be available on the KSU Agricultural Economics website at the following web location:

http://www.agmanager.info/sites/default/files/pdf/OBrien_GrainMarketDrivers_03-15-17.pdf