Soybean projections just keep rising
URBANA, Ill. (University of Illinois) – Stocks of U.S. soybeans at the end of the current marketing year are expected to be at an eight-year high, according to a University of Illinois agricultural economist.
In addition, the current South American soybean harvest is estimated at a record 6.06 billion bushels, 378 million bushels larger than the 2014 harvest and 710 million bushels larger than the 2013 harvest.
The USDA projects Sept. 1, stocks of soybeans in South America at 2.2 bb, 523 mb more than the inventory of the previous year.
“Soybean prices have remained relatively high in the face of such large U.S. and world soybean supplies,” said Darrel Good, “with the unweighted average price received by U.S. producers during the first five months of the 2014-15 marketing year likely near $10.25 per bushel.
“However, prices have declined by 50 to 60 cents per bushel over the past month. Increasingly, soybean prices will take direction from the prospective size of the 2015 U.S. crop and the prospects for stocks at the end of the 2015-16 marketing year.
“Expectations about the size of the U.S. crop begin with expectations about planted acreage.”
U.S. soybean plantings were at a record 83.7 million acres in 2014, 6.86 million more than were planted in 2013 and 8.65 million more than were planted in 2011.
Expectations for 2015 are in a wide range. The USDA’s baseline projections show acreage unchanged from last year.
Congressional Budget Office projections released last month point to planted acreage of 86 million acres.
“Other private estimates are as high as 88 million acres,” Good said. “Those expecting a large increase in soybean acreage point to the large reduction in soft red winter wheat acreage that frees up additional acreage for spring-planted crops.
“In addition, the lower cost of producing soybeans relative to corn and the perceived price advantage of soybeans relative to corn have fueled expectations of a further acreage shift from corn to soybeans.
“The price advantage of soybeans relative to corn, however, has faded over the past month as the ratio of November soybean futures to December corn futures has declined from 2.4 to 2.33.”
Given the large increase in soybean acreage over the past three years, Good said, a more modest increase might be expected this year if crop prices remain near current levels.
“Planted acreage near 85.5 million seems a reasonable expectation,” Good said. “The USDA will survey producer planting intentions next month and release an estimate of those intentions in the March 31 Prospective Plantings report.
“Since the beginning of the freedom to farm era in 1996, planting intentions reported in March have provided an unbiased forecast of actual plantings.
“Over the 19-year period from 1996 through 2014, actual acreage exceeded intentions in 10 years and was less than intentions in nine years.
“On average, actual plantings exceeded intentions by 98,000 acres. However, the difference (some negative and some positive) exceeded 1 million acres in nine years, 2 million acres in four years, and 3 million acres once.
“The June USDA Acreage report will provide a clearer picture of soybean acreage,” he said.
Since 1996, the difference between planted and harvested acreage of soybeans ranged from 595,000 to 1.86 million acres and averaged 1.1 million acres.
The difference was large in years of widespread drought and small in years with generally favorable conditions.
A combination of record planted acreage and normal weather might lead to abandonment of about 900,000 acres in 2015. Planted acreage of 85.5 million acres would point to harvested acreage of about 84.6 million acres.
Yield expectations for 2015 are generally based on an analysis of trend yield.
“We calculate a linear trend of actual yields from 1960 through 2014,” Good said. “That trend explains 88 percent of the variation in actual yields over that 55-year period and indicates an increase in the average U.S. yield of an increase of four-tenths of a percent in bushels per acre per year.
The trend yield calculation for 2015 is 44.4 bushels per acre. The trend yield may understate expected yield under average growing season. Average weather in 2015 might point to an average yield near 45 bushels per acre.
That is equal the CBO baseline projection and one bushel less than the USDA baseline projection. Yield at that level would point to a 2015 crop of 3.81 bb, 162 mb smaller than the 2014 crop, Good said.
He said a crop of 3.81 bb, along with stocks of soybeans at the beginning of the 2015-16 marketing year at the current USDA projection of 385 mb and imports of 15 mb, points to a marketing-year supply of 4.2 bb, 121 mb larger than the supply for the current year.
To prevent a further increase in year-ending stocks next year, that level of supply would require consumption of U.S soybeans to exceed 3.822 bb, 121 mb larger than the projection for the current year.
“Such a large increase appears unlikely,” Good said. “Compared with the current marketing year, expectations for the 2015-16 soybean marketing year include increased acreage, a further increase in year-ending stocks, and lower prices.
“The expected price decline is moderated by the likelihood that stocks at the end of the current marketing year will be about 90 mb less than projected last fall.
“That is equivalent to 2 million acres. Prices are not expected to be as low as the CBO baseline projection of $8.19 or even the USDA baseline projection of $8.50.
“The futures market currently points to a marketing year-average near $9.50.”
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