Robust Soybean Meal Exports Propel Strong
Domestic Use of Soybeans
(November 13, 2014) USDAs November Crop Production report indicated this year's soybean yield at a record 47.5 bushels per acre, up from last month's forecast at 47.1 bushels. As a result, 2014/15 soybean production was forecast 31 million bushels higher to 3.958 billion. Additional soybean supplies prompted USDA to raise its 2014/15 export forecast 20 million bushels this month to 1.72 billion. Strong export sales for soybean meal also led to a higher forecast of the 2014/15 crush this month by 10 million bushels to 1.78 billion. The forecasts of higher soybean demand in 2014/15 fully offset the production gains and leave the forecast of season-ending stocks unchanged at 450 million bushels.
USDA is forecasting global sunflowerseed production for 2014/15 at 39.8 million metric tons. In Russia, yield losses for sunflowerseed led USDA to lower its 2014/15 production forecast to 9 million tons from 9.5 million last month. In contrast, record high sunflowerseed yields for the European Union raised its production forecast to 8.8 million tons, which is seen lowering EU imports of sunflowerseed meal and sunflowerseed oil.
Higher Yields Add to U.S. Soybean Supply
USDAs November Crop Production report indicated this year's soybean yield at a record 47.5 bushels per acre, up from last month's forecast at 47.1 bushels. As a result, 2014/15 soybean production was forecast 31 million bushels higher to 3.958 billion. Higher yields for Iowa, South Dakota, North Dakota, and Nebraska account for most of this months production gains.
The transition between the minimal soybean carryover on September 1 and the collection of this years huge crop has not been entirely smooth. In September and October, favorably dry weather facilitated the soybean harvest in the upper Midwest. In contrast, showery weather throughout the Corn Belt delayed the overall harvest by at least a week behind its usual schedule. Drier weather in the last half of October allowed harvesting to catch up although it still lags a bit in the eastern Corn Belt. By November 9, the U.S. soybean harvest was 90 percent complete--nearly equaling its 5-year average.
Strong Soybean Demand, Harvest Delays Lend a Fleeting Boost to Prices
The additional soybean supplies can only aid U.S. export demand. USDA raised its 2014/15 export forecast 20 million bushels this month to 1.72 billion. In September, refilling of the soybean supply pipeline was slowed by low carryover stocks, harvest delays, and logistical problems. September soybean demand was tempered as a consequence. By the end of October, however, soybean exports accelerated with the advancing harvest. In fact, soybean export inspections for October (339 million bushels) were an all-time monthly record. A good indicator of the comparative strength of exports is the unusually wide price spread that exists between Gulf ports and central Illinois. Also factoring into a higher export forecast are planting delays in Brazil, which could postpone the seasonal decline in U.S. exports that typically starts between February and March.
Domestic crushing this fall has also lagged last years pace as receipts of soybeans by processors have been delayed. At the same time, demand for soybean meal has been very brisk, particularly for the export market. U.S. export sales commitments of soybean meal as of October 30 were 26 percent ahead of last years record level. A recent decline in export competition from Argentina and Brazil also concentrates more attention on U.S. supplies. USDA forecast Argentine soybean meal exports 3.5 percent lower this month to 27.8 million metric tons. The robust U.S. soybean meal sales mean that soybean crushing will continue expanding over the next few months. The 2014/15 crush forecast was raised 10 million bushels this month to 1.78 billion. Although the early pace of soybean meal sales will eventually wane, USDA raised its 2014/15 export forecast 800,000 short tons to 12.8 million on account of the strong sales pace.
The forecasts of higher soybean demand in 2014/15 fully offset the production gains and leave the forecast of season-ending stocks unchanged at 450 million bushels. USDA also forecast the U.S. season-average farm price at $9.00-$11.00 per bushel--unchanged from last month.
Current prices for soybean meal are down sharply compared to its September average of $526 per short ton. In October, the average price was $382 per ton. Given the aforementioned supply issues, meal prices likely bottomed out in early October at $340 per ton and have since rallied. However, the acute short-term shortages do not alter the fundamental fact that the market must dispose of a massive supply of soybeans for the entire year. As the availability of the crop improves, the crushing pace will soon accelerate and pressure the soybean meal price. Soybean planting in South America is now well underway and large crops will arrive in the market by next spring. Once the U.S. export market subsides, it will reinforce the downward price trend. Despite the recent climb, USDA left its forecast of the 2014/15 season-average price for soybean meal unchanged at $330-$370 per short ton. The forecast price range for soybean oil was also unchanged at 34-38 cents per pound.
Russian Sunflowerseed Yield Losses Counter an Excellent EU Harvest
USDA is forecasting global sunflowerseed production for 2014/15 at 39.8 million metric tons. This is down 350,000 tons from last month as lower crop estimates for Russia and Kazakhstan offset a smaller gain for the European Union.
By October 30, the Russian sunflowerseed harvest was reported 85 percent complete. Extreme heat and low rainfall in August caused larger yield losses than previously anticipated. USDA lowered its 2014/15 forecast of Russian sunflowerseed production to 9 million tons from 9.5 million last month. As a result, the 2014/15 crush forecast was lowered by 450,000 tons to 8.65 million. Lower output of sunflowerseed meal and sunflowerseed oil in Russia is likely to reduce exports of both commodities. Over the last 5 years, Indian imports of sunflowerseed oil have more than doubled to make it one of the top buyers, but reduced global supplies this year could stall that growth.
In contrast, record high sunflowerseed yields for the European Union are expected in 2014/15 due to above-average summer rainfall. A repeat of last years excellent sunflowerseed harvests in Romania and Bulgaria raises this years EU production forecast to 8.8 million tons. So, despite 6 percent less area sown to sunflowerseed, this crop is only marginally below last years record (8.9 million tons). A record 2014/15 crush is seen lowering EU imports of sunflowerseed meal and sunflowerseed oil (particularly from Russia).
Late-Season Dryness Curbs Australian Canola Crop
Global production of rapeseed in 2014/15 is forecast up 352,000 tons this month to 70.7 million. The EU rapeseed crop estimate was raised 500,000 tons (to 24 million) based on a larger area estimate for Poland and higher yield for Germany. These gains are countering expectations of a smaller Australian harvest. The large domestic harvest may reduce EU rapeseed imports for 2014/15 to 2.4 million tons--a 5-year low.
In Australia, lower yield prospects for canola reduced the 2014/15 production forecast by 150,000 tons this month to 3.3 million. The reduction can be largely attributed to drought and an August frost in southeastern and southern Australia. Cumulative rainfall in Victoria--a major canola-producing region--was only about one-third of the historical average this season. Rainfall in west Australia was generally better than in the southeast but still below average during the canola crops flowering stage.
All of this months reduction in the Australian canola crop is seen moderating an increase in the country's season-ending stocks. USDA had already forecast a 21-percent decline in Australian exports for 2014/15 due to an excellent harvest in the EU--a major destination for Australian canola. And, despite likely strong demand in China (the other main import market), Australian exports of canola have strong competition there from Canadian exports.
In Canada, this year's canola harvest is now nearly complete. Canola exports from Canada for 2014/15 are forecast 300,000 tons higher this month to 8.3 million.
Although railcar shortages are still prevalent in Canada, shipments have been more regular than they were a year ago. According to the Canadian Grain Commission, cumulative exports of canola through November 2 were 35 percent ahead of their pace from a year ago. Depreciation of the Canadian dollar against the U.S. dollar (6 percent since July) is also aiding Canadian exports.
November 13, 2014
Economic Research Service
USDA, Washington, D.C.