Soybean demand is good. Production is better.
Even though last week's U.S. Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) and Crop Production reports are bearish overall, Iowa Soybean Association (ISA) and oilseed experts say there are positives in the marketplace, which may benefit farmers long term.
U.S. soybean production this year is projected at 3.92 billion bushels, up 31 million bushels from last month, according to the reports. That’s 500,000 bushels less than last year’s record crop. The average yield is estimated at 46.9 bushels per acres, .9 bushels above last month’s estimate.
Iowa’s soybean harvest is projected at 515 million bushels, averaging 52 bushels per acre.
The WASDE Report said national soybean supplies for 2015/16 are projected at 16 million bushels above last month based on higher production forecast. Soybean ending stocks are projected at 470 million bushels, up 45 million from last month.
“The bottom line is production is outstripping demand,” said Grant Kimberley, ISA market development director. “But I’m still of the opinion that the USDA is over-estimating the soybean production numbers.
“As famers know, above-average rainfall in June rarely means above-average yields,” he added. “Soybeans don’t like wet feet, which can lead to late-season disease pressure.”
According to the WASDE Report, the U.S. soybean crush is projected to increase by 20 million bushels to 1.86 billion. However, exports were lowered by 50 million bushels to 1.72 billion as a result of slow sale commitments.
“The USDA has a history of underestimating Chinese demand,” Kimberley said.
The U.S. season-average soybean price for 2015/16 is forecast at $8.40 to $9.90 per bushel, down 10 cents at the midpoint from last month, according to the government.
Oilseed consultant John Baize of Falls Church, Va. is skeptical the market can support these prices in the long term given supply and demand dynamics. However, he noted several positive signs:
- Low prices create demand.
- A poor rapeseed crop in Europe will likely generate more soybean meal demand.
- Domestic and global demand for soybean meal remains strong.
- Currently Chinese pork producers reportedly enjoy a $117-per-head profit.
“No one will quit buying soybeans with that much profit in pigs,” Baize said, noting China buys 65 percent of exported soybeans.”
Even though demand is expected to remain strong, Baize is leery that prices may be too high.
“We are going to come to the realization that no one in the world needs to buy ahead,” he said. “That’s when we will find out the true value of soybeans.”
ISA President-Elect Wayne Fredericks of Osage suggests using information in the reports to lower input costs next year.
“Take the opportunity to show your landlords that prices can fluctuate,” Fredericks said. “Use the current market situation as a bargaining tool when negotiating 2016 land rent.”