Oil Crops Outlook: Summer yield losses for soybeans

Farm Forum

Very low August rainfall for the Midwest triggered a 1.4-bushel-per-acre reduction in the 2013/14 U.S. soybean yield forecast to 41.2 bushels. This year’s soybean crop is expected to total 3.149 billion bushels-down 106 million against last month’s forecast. Despite a lowering of 2013/14 exports and domestic use, a reduced soybean crop cuts this month’s forecast of season-ending stocks by 70 million bushels to 150 million. As a consequence, USDA raised its forecast of the U.S. season-average farm price for 2013/14 to $11.50-$13.50 per bushel from $10.35-$12.35 last month.

In Brazil, strengthening soybean prices are expected to raise its 2013/14 soybean area by 4 percent to 28.9 million hectares. That could boost Brazil’s soybean crop to a record 88 million metric tons, which-if realized-would top U.S. production (85.7 million) for the first time. Soybean export expansion from Brazil in 2013/14 to a record 42.5 million tons would intensify the competition with U.S. exports.

August Dryness Suppresses Midwestern Soybean Yields

This summer, drought gripped a major part of the western Corn Belt and appears to be gradually spreading eastward. Dryness worsened for the region in August as rainfall was no better than 25 percent of normal. In 119 years of weather data, Illinois had its third driest August on record while Indiana had the fourth driest and Iowa and Minnesota the seventh driest. A Midwestern heat wave over the second half of the month only accelerated the loss of soil moisture.

Such conditions were very untimely for the soybean crop as most were in a critical stage of pod development (97 percent were doing so by September 8). A quick deterioration in soybean conditions has followed. The percentage of the crop that was rated in good-to-excellent condition declined from 64 percent as of August 4 to 52 percent by September 8. Time is running out for any rains this month to provide a late boost to yields (like they did last year). Many Midwestern soybeans are getting too mature for further bean development given that 10-25 percent of them are already yellowing. Except for the latest sown soybeans, their advancing maturity means the chance for frost damage is diminishing as well. In contrast, more favorable moisture conditions for soybeans were observed this year in the Ohio River Valley and the Southeast.

This month, USDA cut soybean yield forecasts for 13 States, with the largest reductions for Missouri, Iowa, North Dakota, and Minnesota. Overall, the national average yield was forecast down to 41.2 bushels per acre. However, damage from last year’s drought was greater because it was more widespread and much hotter than this summer. Pod counts improved this year for most States compared to a year ago but are generally below 10-year averages. The 2013 yield forecast is down from last month’s forecast of 42.6 bushels yet better than last year’s at 39.6 bushels. On an expected harvested area of 76.4 million acres, this would produce a soybean crop totaling 3.149 billion bushels. The loss of production against last month’s forecast is 106 million bushels.

Tighter Outlook for Soybean Stocks Leads to Recent Price Surge

U.S. export sales of new-crop soybeans are at an all-time high for early September, with particularly strong sales to China. Soybean shipments for September should start slowly, though, due to low beginning stocks and expectations for a later-than-usual harvest. USDA trimmed its forecast of U.S. soybean exports for 2013/14 by 15 million bushels to 1.37 billion based on a dimmer crop outlook and rising foreign competition.

Likewise, the domestic soybean crush for 2013/14 is forecast 20 million bushels lower to 1.655 billion as demand for soybean meal may be curtailed. Domestic consumption of soybean meal in animal feed would be tempered by higher costs, which is expected 250,000 short tons lower to 29.95 million. Soybean meal shipments to foreign countries may become less price-competitive in 2013/14 as well. U.S. soybean meal exports are expected to decline to 9.5 million short tons from 11.1 million in 2012/13. Despite lower demand, a larger crop reduction this month cuts the forecast of season-ending soybean stocks by 70 million bushels to 150 million. Even so, this season’s carryout is seen well above the 2012/13 ending stocks forecast at 125 million bushels.

Soybean prices have rallied with prospects for a tighter balance between U.S. supplies and demand. USDA raised its forecast of the U.S. season-average farm price for 2013/14 to $11.50-$13.50 per bushel from $10.35-$12.35 last month. For soybean meal, prices are again soaring with the tight current supply and may not ease much until the start of new-crop crushing later this fall. The USDA forecast of the 2013/14 average soybean meal price was raised $55 per short ton this month to $360-$400.

In contrast, soybean oil prices are on a lower trajectory despite declining U.S. stocks. Ample global stocks of vegetable oil and worldwide successes for new-crop oilseed production are keeping the pressure on soybean oil prices. The 2013/14 average price was forecast down 1 cent this month to 43-47 cents per pound, compared with the 2012/13 average at 47.25 cents per pound. Even at this reduced price level, U.S. soybean oil could be less competitive next year with other origins for vegetable oil. U.S. exports of soybean oil are seen slumping to a 10-year low of 1.05 billion pounds.

Large imports of soybean oil and soybean meal were avoided this summer by record-high imports of soybeans, which were crushed to produce domestic supplies of both commodities. This month, USDA reduced its 2012/13 forecasts of soybean meal imports to 250,000 short tons while soybean oil imports were lowered to 250 million pounds. Alternatively, 2012/13 imports of soybeans were forecast up by 5 million bushels to 40 million.