Grain Market Update (5th of 5 parts) – Graphics of U.S. Soybean Market Outlook

In the following charts is the fifth of five (5) blog posts illustrating parts of the “Grain Market Outlook for 2017” presentation given by Kansas State University Extension Agricultural Economist Daniel O’Brien.  The complete presentation will be available on the www.AgManager.info website provided by the Department of Agricultural Economics at Kansas State University .

This fifth of five (5) related blog posts provides information on Soybean Market Situation and Outlook.

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Grain Market Update (3rd of 5 parts) – Graphics of U.S. Grain Sorghum Market Outlook

In the following charts is the third of five blog posts illustrating parts of the “Grain Market Outlook for 2017” presentation given by Kansas State University Extension Agricultural Economist Daniel O’Brien.  The complete presentation will be available on the www.AgManager.info website provided by the Department of Agricultural Economics at Kansas State University .

This third of five (5) related blog posts provides information on Grain Sorghum Market Situation and Outlook.

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Grain Market Update (2nd of 5 parts) – Graphics of U.S. Corn Market Outlook

In the following charts is the second of five (5) blog posts illustrating parts of the “Grain Market Outlook for 2017” presentation given by Kansas State University Extension Agricultural Economist Daniel O’Brien.  The complete presentation will be available on the www.AgManager.info website provided by the Department of Agricultural Economics at Kansas State University .

This second of five (5) related blog posts provides information on Corn Market Situation and Outlook.

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KSU Weekly Grain Market Analysis: Lower U.S. Winter Wheat Acres and Tighter U.S. Corn-Soybean Supply-Demand

Grain market summary notes, charts and comments supporting the KSU Agriculture Today Grain Outlook to be played on Friday, January 13th is available on the Kansas State University www.AgManager.info website at the following KSU web address:

https://www.agmanager.info/sites/default/files/pdf/KSRN_GrainOutlook_01-13-17.pdf

The recorded radio program was aired at 10:03 a.m. central time, Friday, January 13th on the K-State Radio Network (KSU Agriculture Today Radio) – web player available.

Later today the program can also be listened to via a link from the following website in the “Radio Interviews” section: http://www.agmanager.info/news#ksrn-radio-interviews

Following are sections of the Working notes for this week’s radio program up on the KSU AgManager.info website…

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KSU Grain Sorghum and World Coarse Grain Market Outlook in December 2016 – USDA Projections for “Next Crop” MY 2017/18

An analysis of U.S. Grain Sorghum and World Coarse Grain supply-demand factors and 2017 price prospects following the USDA’s December 9th World Agricultural Supply Demand Estimates (WASDE) reports will be available shortly on the KSU AgManager website (http://www.agmanager.info/default.asp).

Following is a summary of the article on U.S. Grain Sorghum & World Coarse Grain 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

Overview

Since the USDA’s December 9th World Agricultural Supply and Demand Estimates (WASDE) report, MARCH 2016 CME corn futures have trended lower.  On the day of the report, MARCH 2016 corn futures closed at $3.59 ½ per bushel, and then moved to a high of $3.63 on December 15th, before declining to a close of $3.49 ¾ on Thursday, December 29th.  The USDA’s forecast of a 462 million bushel (mb) 2016 U.S. grain sorghum crop along with record large 2016 U.S. corn crop of 15.226 billion bushels (bb), along with large 2016/17 marketing year U.S. feedgrain ending stocks of 64.8 million metric tons (mmt) – up 35%-38% from the previous two marketing years – and have continued to pressure both U.S. grain sorghum and corn market prices.

Cash grain sorghum prices in Kansas

Cash bids for grain sorghum in Kansas on December 29th were near $2.50 per bushel in many locations, with ethanol plants and some export oriented locations at $2.85-$3.05 /bu..

At major grain elevators in western Kansas, cash grain sorghum prices were in the range of $2.40 – $2.55 /bu on Thursday, December 29th with basis levels $0.95 to $1.10 under CME MARCH 2017 Corn futures.  As low as these prices were, they were still markedly higher than county FSA marketing loan rates of $1.76-$1.90 per bushel.  Similarly, central Kansas cash grain sorghum prices were in the range of $2.48 – $2.84 /bu with basis levels $1.02 to $0.65 under MARCH 2017 Corn, but still above local FSA loan rates of $1.85-$1.93 /bu..  At Topeka in east central Kansas, a higher bid was reported of $3.05 /bu (basis = $0.45 under).  Kansas ethanol plant bids for grain sorghum ranged from $2.84 ¾ to $2.89 ¾, with basis at $$0.60-$0.65 under MARCH 2017 Corn futures.  Just as with corn, wheat, and soybeans, current cash bids for grain sorghum are below cost of production in most instances – although to a degree high yields in 2016 has helped to mitigating this factor.

Although the existing “large supply and tight storage availability” situation predominates in local Kansas grain sorghum and corn markets in late December 2016, it is a positive sign that usage of these crops has provided enough market support so that Kansas cash prices have not fallen down to USDA loan rate – price support levels during the 2016 harvest and immediate post-harvest period.

Other Feedgrain Market Considerations

Other market factors to consider that could affect the U.S. feedgrain markets in 2017 include: 1) the pace and timing of U.S. farmer marketing of the 2016 grain sorghum and corn crops – much of which had been placed in storage after the 2016 fall harvest and likely will be held for sale through the winter into at least early spring 2017, 2) anticipation of continued strong use of 2016 crop U.S. feedgrains for domestic U.S. ethanol production and livestock feeding, 3) at least moderate strength in U.S. grain sorghum exports – driven partly by a poor Brazilian feedgrain harvest and lack of exportable supplies in earlier in 2016, as well as other World coarse grain market factors, and 4) the always present possibility of broader U.S. and Foreign economic and/or financial system disruptions impacting grain, energy, and other commodity markets in 2017.

For example, U.S. financial policy announcements by the U.S. Federal Reserve in 2017 could lead to increases in U.S. interest rates and the value of the U.S. dollar relative to other World currencies, which could in turn have a negative impact on U.S. grain sorghum exports.  Also, World geo-political events could provide  unanticipated “shocks” to U.S. and World energy and grain markets.  The impact on the direction of U.S. and World grain sorghum and corn markets from these potential disruptions is difficult to anticipate or predict.

USDA Supply-Demand Forecast for “Current” MY 2016/17

The USDA has projected of 2016 U.S. sorghum plantings of 6.761 ma, harvested acres of 6.045 ma, record high yields of 76.5 bu/ac (vs 76.0 bu/ac in 2015 and 67.6 bu/ac in 2014), resulting in a 2016 U.S. grain sorghum production is forecast to be 462 mb – down from 597 mb in 2015, but above 433 mb in 2014, and 392 mb in 2013.

With forecast “current” MY 2016/17 total supplies of 500 mb, total use of 465 mb, and projected ending stocks of 35 mb (7.48% S/U), U.S. grain sorghum prices are projected by the USDA to be in the range of $2.80-$3.30 (midpoint = $3.05 /bu).  Ending stocks of 35 mb (7.48% S/U) in “current” MY 2016/17 compare to 37 mb (6.28% S/U) in MY 2015/16, and 18 mb (4.10% S/U) in MY 2004/05.  United States grain sorghum prices of $3.05 /bu in “current” MY 2016/17 continue the downward trend from $3.31 /bu in MY 2015/16, $4.03 in MY 2014/15, $4.28 in MY 2013/14, and the record high of $6.33 /bu in the drought year of MY 2012/13.

USDA Supply-Demand Forecast for “Next Crop” MY 2017/18

With early USDA projections of 2017 U.S. sorghum plantings of 6.300 ma (down 461,000 acres), harvested acres of 5.400 ma (down 645,000 acres), projected yields of 67.1 bu/ac (vs the record high of 76.5 bu in 2016), 2017 U.S. grain sorghum production is forecast to be 362 mb – down from 462 mb in 2016, and 597 mb in 2015.

With forecast “next crop” MY 2017/18 total supplies of 397 mb (down from 500 mb last year and 620 mb the year before), total use of 365 mb (down from 465 mb last year and 583 the year before), and projected ending stocks of 32 mb (8.76% S/U) – down from 35 mb (7.48% S/U) in “current” MY 2016/17 – U.S. sorghum prices are projected by the USDA to average $3.10 /bu.

Note: This is a “large U.S. feedgrain crop” – “no major U.S. or Foreign crop problem” scenario.  Emerging production threats and the actual outcome of 2017 U.S. grain sorghum and corn production will drive the U.S. grain sorghum market in “next crop” MY 2017/18.

World Coarse Grain Supply-Demand

Record high World coarse grain production of 1,329.35 million metric tons (mmt) is projected for “current” MY 2016/17, up 6.4% from 1,249.65 mmt in MY 2015/16, and up 1.8% from 1,306.1 mmt in MY 2014/15.  Record high World coarse grain total supplies of 1,574.15 mmt are projected for “new crop” MY 2016/17, up from 1,495.0 mmt in MY 2015/16, and from 1,517.2 mmt in MY 2014/15.  “Coarse grains” include grain sorghum, corn, barley, oats, rye, millet, and mixed grains.

World coarse grain exports of 185.2 mmt are projected for “new crop” MY 2016/17, up 12.4% from 164.8 mmt in MY 2015/16, and down 0.5% from 186.1 mmt in MY 2014/15.  Projected record high World coarse grain ending stocks of 254.9 mmt (19.3% S/U) in “new crop” MY 2016/17 are up from 244.8 mmt (19.6% S/U) in MY 2015/16, but down from 245.4 mmt (19.3% S/U) in MY 2014/15.

Although World coarse grain ending stocks are projected to be a record high in “new crop” MY 2016/17 at 254.9 mmt, World coarse grain percent ending stocks-to-use in “new crop” MY 2016/17 are forecast to actually decline marginally to 19.3% – indicative that strong World demand for coarse grains at low prices is expected to continue – especially in Europe where grain production has been hampered by extreme weather conditions in the last year.

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KSU Soybean Market Outlook in September 2016 – Positive U.S. Crush and Exports Offer Hope to Soybean Market

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/soybean-market-outlook-september-2016

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Summary

Market Overview

Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on September 12th, soybean futures prices have moved both higher and lower within approximately a $0.50 range.  From the September 12th close of $9.64 ¼, 2016 when CME NOV 2016 soybean futures prices have traded from a low of $9.40 ½ on 9/14 to a high of $9.94 on 9/20, before closing at $9.49 ¼ on 9/27/2016.

Since 2014, World soybean market prices have been limited by a developing “large crop – low price” supply-demand regime, caused by consecutive record World soybean production years for 2014 and 2015, with large but not record crop in South America and a record high in the United States.  Lower than expected 2016 production in Brazil has led to record high U.S. soybean export trade prospects in “new crop” MY 2016 (starting 9/1/2016).

World Production, Ending Stocks & % Stocks-to-Use

Longer term, from MY 2008/09 to projected “new crop” MY 2016/17, the USDA forecasts a strong upward trend in World soybean production (up 7.0% annually) which will have “out-paced” the increase in World soybean use (up 6.0% per year) if it holds true.  However, the shortfall in South American’s soybean production in “old crop” MY 2015/16 has at least temporarily interrupted these trends, and has caused projected World soybean ending stocks and percent ending stocks-to-use to fall since MY 2014/15.

As this trend toward larger supplies has “abated” in “old crop” MY 2015/16 and for projected “new crop” MY 2016/17, U.S. and World soybean prices have received at least moderate support.  Since World soybean ending stocks of 62.0 mmt (22.4% S/U) in MY 2013/14, stocks grew sharply in MY 2014/15 to 78.5 mmt (26.1% S/U), but have since declined to an estimate of 72.9 mmt (23.0% S/U) in “old crop” MY 2015/16, and are forecast to decline further marginally to 72.2 mmt (22.0% S/U) in “new crop” MY 2016/17.

Key Focus in 2017 on Weather in South America and the U.S.

A key World soybean market issue will be to find out if 2017 weather or disease problems in South America end up driving southern hemisphere soybean production low enough to alter the existing “large supply – buyer’s market” situation that has existed in U.S. and World soybean markets in recent years.

Markets will also be focusing on the degree to which the record large 2016 U.S. soybean crop will “rectify” this short run trend toward lower World soybean ending stocks and lead to a re-establishment of the “large supply – low price” situation in fall 2016 that had existed during the 2014-2015 time period.

USDA U.S. Soybean Supply-Demand Forecast of “Old Crop” MY 2015/16

The USDA raised its forecast of U.S. soybean exports and sharply tightened ending stocks to use in “old crop” MY 2015/16.  With a projection of U.S. total supplies at 4.145 bb and domestic crush at 1.900 bb, the USDA forecast U.S. exports to be 1.940 bb – up 60 mb from August. With this change, total use increased 60 mb to 3.949 bb, with ending stocks declining to 195 mb (down 60 mb.

Ending stocks-to-use are projected at 4.94% – down from 6.56% in August, and 9.225% in July, and essentially equal to 4.95% in MY 2014/15, but still above the record low of 2.65% in MY 2013/14.  The USDA forecast “old crop” MY 2015/16 U.S. soybean average prices to be $8.95 /bu – down from $10.10 in MY 2014/15, $13.00 in MY 2013/14, and the record high of $14.40 in MY 2012/13.

USDA Forecast for “New Crop” MY 2016/17 (65% LikelihoodKSU)

The USDA left unchanged its projection of 2016 U.S. soybean plantings of a record high 83.688 million acres (ma) – up from 82.650 ma in 2015.  Forecast 2016 harvested acres of a record 83.037 ma is also up from 81.814 ma in 2015.  With record high projected yields of 50.6 bu/ac (up 1.7 bu from August), 2016 U.S. soybean production is projected to be a record high 4.201 bb – up from 3.929 bb in 2015 and 3.927 bb in 2014.   With forecast “new crop” MY 2016/17 domestic crush at a record 1.950 bb (up 10 mb) and exports at a record 1.985 bb (up 35 mb), projected total use equals 4.061 bb (a new record high ahead of 3.949 bb in “old crop” MY 2015/16 and 3.862 bb in MY 2014/15).

Given these results,  ending stocks are forecast to be 365 mb (8.99% S/U), while U.S. soybean prices are estimated by the USDA to be in the range of $8.30-$9.80 (midpoint = $9.05 /bu) – up from the $8.95 /bu in “old” MY 2015/16.  This USDA projection is thought to have a 65% probability of occurring according to Kansas State University Extension.

Alternative KSU Forecast for “New Crop” MY 2016/17 (35% LikelihoodKSU)

An alternative KSU-Scenario for U.S. soybean supply-demand and prices is presented for “new crop” MY 2016/17.  In this market perspective U.S. soybean domestic crush is projected to be 2.000 bb – up 50 mb from the USDA’s projection.  Also, U.S. soybean exports are forecast to be 2.035 bb – also up 50 mb from USDA estimates.  Taken together, U.S. soybean total use is forecast to be 4.161 bb – up 100 mb from USDA.

Ending stocks are forecast to be 265 mb – down 100 mb vs USDA #s, with % ending stocks-to-use estimated to be 6.37% – down from 8.99% S/U according to USDA projections.  Under this scenario, “new crop” MY 2016/17 U.S. soybean average prices would likely average $9.70 /bu – compared to the USDA’s midpoint projection of $9.05 per bushel.  This scenario is thought to have a 35% likelihood of occurring – compared to a 65% probability of occurrence for the USDA supply-demand and price projection for U.S. soybeans in “new crop” MY 2016/17.

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USDA Grain Stocks Report on June 30th – Stocks and Use Trends for the U.S.

On June 30th the USDA National Agricultural Statistics Service (NASS) released its Grain Stocks Report – providing information on June 1st stocks and March-May 2016 use of U.S. of corn, grain sorghum, soybeans and wheat.  A copy of the full report will be released on July 5th on the www.AgManager.info website by the Kansas State University Department of Agricultural Economics (http://www.ageconomics.k-state.edu/).

Following is the article:

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A. U.S. Corn June 1st Stocks & March-May Usage

U.S. Corn Stocks on June 1, 2016 = 4.722 billion bushels (bb)……..Up 194 million bushels (mb) from pre-report trade expectations, and up 6.0% from 4.453 bb on 6/1/2015, up 22.6% from 3.852 bb on 6/1/2014, and up from 2.766 bb on 6/1/2013, and 3.148 bb on 6/1/2012 (See Table 1).

U.S. Corn Usage during March-May 2016  3.100 bb……..Down ≈ 180 mb from implied pre-report trade expectations, and less than 3.307 bb in Mar-May 2015, and 3.165 bb in Mar-May 2014, but still up from 2.674 bb in Mar-May 2013, and 2.886 bb in Mar-May 2012 (See Table 2).

On-Farm Storage of U.S. corn on June 1, 2016 is estimated to be 2.471 bb, up 8.6% from a year earlier, and indicative of a large amount of unsold U.S. corn yet in “current crop” 2015/16.  Large on-farm and off-farm carryover supplies of U.S. corn are likely to continue to be a limiting factor for U.S. corn cash prices in coming months – absent a weather-related, negative set of production factors in July-August 2016.

Off-Farm Commercial Storage of U.S. corn on June 1, 2016 is estimated to be 2.251 bb, up 3.3% from a year earlier, and also indicative of large available yet-unused U.S. corn supplies and of limited prospects for U.S. corn prices this summer.

Market Implications => Higher than expected June 1, 2016 U.S. corn stocks resulting from lower than expected March-May 2016 U.S. corn use are negative factors for U.S. corn price prospects for the remainder of 2016.  United States’ corn stocks of 4.722 bb on June 1, 2016 are from 6% to 71% larger than June 1 stocks over the 2012-2015 period, and likely to be a limiting factor in any potential major corn price rallies – absent major U.S. corn production problems in the summer of 2016.

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B. U.S. Grain Sorghum June 1st Stocks & March-May Usage

U.S. Grain Sorghum Stocks on June 1, 2016 = 88 mb……..Down 32 mb from pre-report trade expectations, but up 158.8% from 34 mb on 6/1/2015, marginally smaller than 92 mb on 6/1/2014, but still up from 41 mb on 6/1/2013, and 59 mb on 6/1/2012 (See Table 1).

U.S. Grain Sorghum Usage during March-May 2016  113 mb……..Up 32 mb from implied pre-report trade expectations, and up from 96 mb in Mar-May 2015, 83 mb in Mar-May 2014, 56 mb in Mar-May 2013, and 50 mb in Mar-May 2012 (See Table 2).

On-Farm Storage of U.S. grain storage on June 1, 2016 is estimated to be 9.700 mb, up 6,740 mb or +227.7% from a year earlier, and indicative of a relatively large amount of unsold U.S. grain sorghum yet in “current crop” 2015/16.

Off-Farm Commercial Storage of U.S. grain storage on June 1, 2016 is estimated to be 78.565 mb, up 47.236 mb or +150.8% from a year earlier, and also indicative of large available yet-unused U.S. grain sorghum supplies available to the market.

Market Implications => A continuation of at least moderately strong exports of U.S. grain sorghum during the first three quarters of the “current” 2015/16 marketing year (i.e., September 2015 through August 2016) have been a major factor in usage being higher than during the previous four (4) March-May periods.

This is a supportive, bullish result for U.S. grain sorghum markets – but given the current oversupply of U.S. corn as well as at least moderate supplies of U.S. grain sorghum – has not had a noticeable positive impact of U.S. grain sorghum basis levels in Kansas and elsewhere in the U.S. central and southern plains states of Oklahoma and Texas.

U.S. Wheat June 1st Stocks & March-May Usage

U.S. Wheat Stocks on June 1, 2016 = 981 mb……..down 1 mb from pre-report expectations, and up from 752 mb on 6/1/2015, 590 mb on 6/1/2014, 718 mb on 6/1/2013, and 743 mb on 6/1/2012 (See Table 1).

U.S. Wheat Usage during March-May 2016 391 mb……..Up 1 mb from implied pre-report trade expectations, and down from 423 in Mar-May 2015, 514 mb in Mar-May 2014, 548 mb in Mar-May 2013, and 486 mb in Mar-May 2012 (See Table 2).

On-Farm Storage of U.S. wheat on June 1, 2016 is estimated to be 197.2 mb, up 27.1% from a year earlier, and indicative of a large amount of unsold U.S. wheat yet available in “current crop” MY 2015/16.  These carryover supplies are likely to continue to be a limiting factor for U.S. wheat cash prices in coming months.

Off-Farm Commercial Storage of U.S. corn on June 1, 2016 is estimated to be 784.1 bb, up 4.2% from a year earlier, also indicative of large available yet-unused U.S. wheat supplies and of limited prospects for U.S. wheat prices at this time for this summer.

Market Implications => Continued weak exports of U.S. wheat during both the Dec-Feb and Mar-May 2016 periods and only moderate wheat feeding to-date have been major factors in U.S. wheat usage being less than during the previous three (3) March-May periods. This is a negative, bearish result for U.S. wheat market prices.

However, the possibility of extreme World weather patterns causing wheat production problems in major foreign wheat producing nations could still mitigate and overcome these negative U.S. supply-demand factors to some degree, and begin to play a positive role in U.S. wheat market direction in coming weeks and months. But as of yet – other than some reports of there being too much moisture for wheat development in parts of Europe and also of reports from China of wheat production problems – significant World wheat production shortfalls and supply-demand disruptions have not occurred yet in 2016.

Also, it is possible that a weather-related, negative set of production factors in the U.S. Corn Belt during July-August 2016 could impact U.S. feedgrain markets and in turn have a positive spill-over, cross-market impact on U.S. wheat feeding – leading to larger than anticipated feeding of low-priced U.S. wheat in Kansas and the southern plains states of Oklahoma and Texas.

D. U.S. Soybean June 1st Stocks & March-May Usage

U.S. Soybean Stocks on June 1, 2016 = 870 mb……..Up 37 mb from pre-report trade expectations, and up sharply from 627 mb on 6/1/2015, 405 mb on 6/1/2014, 435 mb on 6/1/2013, and 668 mb on 6/1/2012 (See Table 1).

U.S. Soybean Usage during March-May 2016  661 mb……..Down ≈ 37 mb from implied pre-report trade expectations, and down from 708 mb in Mar-May 2015, while being up from 614 mb in Mar-May 2014, and 571 mb in Mar-May 2013, while down from 712 mb in Mar-May 2012 (See Table 2).

On-Farm Storage of U.S. soybeans on June 1, 2016 is estimated to be 281 mb, up 14.2% from a year earlier, and indicative of sizable supplies of unsold U.S. soybeans yet in “current crop” 2015/16 – that (similar to corn and wheat markets) is likely to be a somewhat of a negative factor in U.S. soybean cash prices in coming months.

However, 2016 production problems in parts of Brazil have provided market support for U.S. soybean exports and domestic soybean crush – making U.S. soybean demand stronger on a relative basis than for U.S. corn and wheat – and has provided at least moderate support to date for U.S. soybean prices.  Also, production risk still exists for the 2016 U.S. soybean crop through late-summer / early fall 2016.

Off-Farm Commercial Storage of U.S. soybeans on June 1, 2016 is estimated to be 589 mb, down 6.1% from a year earlier, and also indicative of commercial demand for U.S. soybeans for the reasons explained immediately above.

Market Implications => At face value, this grain stocks report is “moderately negative” for U.S. soybean markets, with higher than expected June 1st U.S. soybean stocks, and moderately lower than expected Mar-May 2016 usage.  However, a recent surge in demand for U.S. soybean exports and domestic crush brought about by South American soybean production problems has provided support of U.S. soybean prices.  This support will likely continue until more is known about 2016 U.S. soybean production prospects – in particular whether any problems or shortfalls will occur in 2016 U.S. soybean production during the summer of 2016.