Record U.S. Soybean Yields To Raise
Season-Ending Stocks to 8-Year High
(September 16, 2014) In its September Crop Production report, USDA raised its U.S. soybean yield forecast for this year to 46.6 bushels per acre, which raises the 2014/15 production estimate by 97 million bushels to 3.913 billion. U.S. soybean exports for 2014/15 are forecast up this month by 25 million bushels to 1.7 billion. A higher demand for soybean meal may also raise the domestic soybean crush by 15 million bushels to 1.77 billion. Season-ending soybean stocks may surge to an 8-year high of 475 million bushels, which led USDA to lower its 2014/15 forecast of the U.S. average farm price by 35 cents to $9.00-$11.00 per bushel.
Higher crop forecasts for the United States, Brazil, and Argentina are expected to swell global soybean stocks in 2014/15 to 90.2 million metric tons. Based on a 4.7-percent increase in area, Brazil soybean production is expected to be up 3 million tons next year to 94 million. Likewise, Argentine soybean area is expected to rise 1 percent in 2014/15, which would boost production by 1 million tons to 55 million. Declining prices are seen encouraging top importer China to import 74 million tons of soybeans in 2014/15--up 1 million tons from last month's forecast.
Fine Summer Weather Swells U.S. Soybean Yields
Precipitation was 50-100 percent above normal for much of the Midwest in August. Coupled with seasonally normal temperatures, the moisture provided nearly ideal growing conditions for soybeans throughout the main period of pod development. In its September Crop Production report, USDA raised its 2014 soybean yield forecast to 46.6 bushels per acre. September yield increases for Illinois, Missouri, South Dakota, and Iowa accounted for more than half of this month's production gain. Crop yields are reduced only for Kansas and South Carolina, where dryness has worsened. Record yields are now anticipated for 7 of the top 10 soybean-producing States.
A higher soybean yield raises the U.S. production estimate for 2014/15 by 97 million bushels to 3.913 billion. This year's output would eclipse the previous record (2009/10) by 16 percent. Soybean harvesting is well underway in Louisiana, Mississippi, and Arkansas and will spread throughout the Midwest over the next few weeks.
An ample U.S. supply of soybeans may garner most of the gains in world trade in the new marketing year. U.S. exports for 2014/15 are forecast up this month by 25 million bushels to 1.7 billion. A higher demand for soybean meal may also raise the domestic soybean crush by 15 million bushels to 1.77 billion. Based on strong sales to date, U.S. exports of soybean meal are forecast 250,000 short tons higher to a prospective record 12 million. Although soybean use is forecast up to an all-time high, season-ending stocks may surge to an 8-year high of 475 million bushels.
The outlook for a growing surplus of soybeans led USDA to lower its 2014/15 forecast of the U.S. average farm price by 35 cents to $9.00-$11.00 per bushel. In August and September, domestic shortages of soybean meal sparked a sharp price increase, with prices in recent days as high as $575-$585 per short ton. However, the rally should soon be cut short by the impending new-crop harvest. The 2013/14 average price for soybean meal was revised up to $490 per ton, but the abundant crop is seen pressuring the 2014/15 average price $10 per short ton lower to $330-$370. Likewise, larger supplies of soybean oil are forecast to lower the 2014/15 average price by 1 cent to 34-38 cents per pound.
Southeast Dryness Likely Trimmed Peanut Yields
Crop conditions for peanuts deteriorated in August as dryness worsened in Georgia, Alabama, and the Florida Panhandle area. As of September 7, only 57 percent of peanuts were rated in good-to-excellent condition down from 68 percent on August 10. This month, USDA forecast a lower U.S.-average yield for peanuts at 3,800 pounds per acre and reduced the crop forecast by 107.5 million pounds. The U.S. peanut crop for 2014/15 is now seen slightly less than 5 billion pounds.
Peanut supplies, however, will remain comparatively large in 2014/15, which will support domestic use and exports throughout the year. Season-ending stocks may stay level with beginning stocks, which ended 2013/14 at 1.86 billion pounds.
For the cotton crop, conditions also deteriorated in the Southeast in August--contributing to lower yields. And, based on administrative data, USDA lowered its sown acreage estimate for U.S. cotton by 359,000 acres to 11 million. Both factors contributed to a lower forecast of 2014/15 cottonseed production. Forecast cottonseed output is lowered 313,000 short tons this month to 5.5 million, but that would still be a 30-percent increase from last year. Harvesting in Texas was 13 percent completed as of September 7. The crop reduction is expected to curtail increases in the cottonseed crush and feed use. Prices for cottonseed, however, will be pressured by an unusually large supply of soybeans.
Economic Forces Sustain Soybean Area Gains in Brazil and Argentina
The 2014/15 forecast of global soybean production increased 6.4 million metric tons from last month to 311.1 million. Aside from forecasting an increase for the United States, USDA also raised crop forecasts for Brazil and Argentina. This growth in production may lead to a swelling of global soybean stocks next year to 90.2 million tons--up 4.6 million from last month and a 35-percent increase from 2013/14.
Soybean planting in Brazil will begin by the end of September. Compared with prices a year ago, cash prices for soybeans in Brazil are down only marginally. In contrast to the recent plunge in U.S. prices, the decline in Brazil is less acute. In center-west Brazil, current soybean prices are more than adequate to cover variable costs and farmers have already sold a major portion of their prospective crop at these values. Brazilian corn prices, however, have weakened faster. In southern Brazil, soybeans are likely to gain area from the summer corn crop as its expected earnings are clearly preferable. Brazil soybean area for 2014/15 is now seen expanding by 4.7 percent to 31.5 million hectares.
As a consequence, Brazil soybean production is expected 3 million tons higher this month to 94 million. An improved supply could raise Brazil soybean exports for 2014/15 to 46.7 million tons, up from last month's forecast of 45 million and 2013/14 shipments of 46.4 million. Domestic soybean crushing could improve to 37.6 million tons versus 36 million in 2013/14. Despite rising soybean use, higher stocks in Brazil are likely with a larger crop and strong U.S. competition.
In Argentina, a deteriorating economy is only reinforcing the incentive to grow soybeans, with few attractive alternatives. Argentine farmers favor soybeans because of its low input costs, particularly on leased cropland. This is an important consideration, as farmers rely on old-crop sales to finance crop planting. And, with prospects for a record U.S. harvest, Argentine corn prices have slumped and dampened the enthusiasm to sow that crop. The heavy rains that inundated parts of Buenos Aires province in August may also set back the planting of corn and sunflowerseed--which usually starts in September. Argentine soybean area is expected to rise 1 percent in 2014/15 to 20 million hectares--up 400,000 hectares from last month. A higher Argentine area for soybeans is seen boosting 2014/15 production by 1 million tons to 55 million. All of this month's production increase for Argentina is likely to push its soybean inventories even higher. Argentine soybean stocks may grow to exceed those in Brazil by more than one-third but with a crop that is 40 percent smaller than its neighbor's.
At a time when Argentine exports of soybean meal should dominate world trade, shipments have been sluggish. Some blame can be attributed to recent strikes by port workers and truckers in Argentina, although processors have also had difficulty acquiring soybeans. The Government defaulted on bond payments in July and raised the likelihood of another devaluation of the peso. The official exchange rate is now overvalued by 70 percent against the market rate. Despite ample stocks and a dimming price outlook, farmers are withholding soybean sales until they need to pay necessary crop expenses. USDA lowered its 2013/14 forecast of Argentine soybean meal exports this month by 1.3 million tons to 25.7 million. The disappointing pace may be partly responsible for a recent spike in U.S. soybean meal prices.
Soybean importers should soon display a response to falling prices. Top importer China is seen importing 74 million tons of soybeans in 2014/15--up 1 million tons from last month's forecast. Even if soybean imports do not get used immediately in China, a declining price trend makes processors more comfortable to accumulate stocks. Feed demand in China could accelerate eventually as profit margins for hog producers appear to be on the upswing. Consumption of soybean meal in China may also be stimulated by new import restrictions on corn distiller's grains, which would otherwise reduce the availability of feed protein. For the EU--which is harvesting its own record-sized oilseed crops--smaller import gains are seen for soybeans.
All-Time High EU Rapeseed Crop Supports Global Supply
Global rapeseed production for 2014/15 is forecast 337,000 tons higher this month to 70.7 million as higher yields for the EU offset a lower yield estimate for Canada. Although global production may decline 467,000 tons from last year, total supplies will expand due to a 2.2-million-ton increase in carryover stocks.
It was quite wet throughout Europe in July and August but rapeseed harvesting has advanced well. EU rapeseed yields have been excellent, particularly for France, Germany, and the Czech Republic. With rapeseed area expanding by only 1 percent this year, higher yields are primarily responsible for an 11-percent increase in EU production from a year ago. USDA's forecast of EU rapeseed production was raised by 750,000 tons this month to 23.4 million. The higher domestic supplies could trim EU imports in 2014/15 to 2.6 million tons from 3.5 million in 2013/14. Limited prospects for growth in the EU rapeseed crush may boost season-ending stocks to 2.6 million tons. Nevertheless, EU vegetable oil production may expand to a record high this season.
In Canada, canola swathing is underway but harvest progress is delayed with the recent cool and wet weather. The Canadian Prairies have received above-normal rainfall this year (excluding the Peace River Valley region of Alberta, where it has been drier than average). Excessive rains in June in southeastern Saskatchewan and southwestern Manitoba caused scattered ponding in fields, damaging yield potential. On account of a lower yield outlook, the 2014/15 production forecast for Canada declined 550,000 tons this month to 14.7 million. But the impact on total supplies is cushioned by a large inventory. Carryover stocks from 2013/14 totaled 2.4 million tons, up from 588,000 tons a year earlier.
Ample Rains Lead to Record-High Yields for EU Sunflower-seed
Global production of Sunflower-seed for 2014/15 is raised slightly this month to 40.5 million tons. Expectations of a larger EU crop have offset declines for Argentina and Bolivia. Except for Spain, Europe has seen moderate temperatures and abundant moisture this summer, which has greatly benefitted Sunflower-seed crops. Excellent Sunflower-seed harvests are anticipated for Romania, Bulgaria, Hungary, and France, which collectively account for more than 80 percent of the EU output. Higher yields in 2014/15 are forecast to raise EU Sunflower-seed production by more than 400,000 tons this month to 8.4 million--the third-highest amount ever. The EU crop would be down 6 percent from last year's record solely due to a decline in harvested area. The EU Sunflower-seed crush could stay comparatively high at 7.2 million tons.
Planting delays are seen trimming the Argentine Sunflower-seed area for 2014/15 this month by 100,000 hectares to 1.5 million. As of mid-September, about 18 percent of the area had been sown. Although a rebound in yields is likely to raise Argentine Sunflower-seed production from a disappointing 2013/14 harvest, production is forecast 200,000 tons lower to 2.7 million. A smaller increase is expected to limit the increase in season-ending stocks.
Precipitation Deficits May Curtail China Peanut Crop
Nearly half of China's peanut crop is centered in the North China Plains provinces of Shandong, Henan, and Hebei. After a 2-month dry spell in the region this summer, cumulative precipitation for the year is at least one-third below the average. The dry spell is expected to trim peanut yields and reduce USDA's forecast of the 2014/15 peanut crop this month by 500,000 tons to 16.5 million. Lower output is expected to reduce domestic use and exports of peanuts in 2014/15. With a good U.S. harvest, China's imports of peanuts may also increase moderately.
September 15, 2014
Economic Research Service
USDA, Washington, D.C.