Oil Crops Outlook: Soybean Stocks Remain High Despite Record Demand

    USDA pegged the final estimate for the 2016 soybean crop at 4.307 billion bushels, down 54 million from last month’s forecast. While still a record, the national average yield estimate was trimmed to 52.1 bushels per acre from the previous forecast of 52.5 bushels.

    USDA’s 2016/17 forecasts of soybean exports and crush are unchanged at 2.05 billion and 1.93 billion bushels, respectively. USDA forecasts season-ending soybean stocks to more than double in 2016/17 to 420 million bushels, although down 60 million bushels from last month’s forecast.

    USDA forecast the U.S. average farm price for 2016/17 at $9.00-$10.00 per bushel this month compared to $8.70-$10.20 previously.

    Domestic Outlook

    Record High First-Quarter Soybean Use May Not Last For a Full Year

    In this month’s Crop Production–2016 Summary report, USDA pegged the estimate for the 2016 soybean crop at 4.307 billion bushels. Compared to the previous forecast, the crop estimate declined 54 million bushels mainly due to downward revisions for Illinois and Indiana.

    While still a record, the national average yield estimate was trimmed to 52.1 bushels per acre from the previous forecast of 52.5 bushels. Soybeans were harvested on a record 82.7 million acres but that is 311,000 acres below last month’s forecast.

    In USDA’s latest Grain Stocks report, U.S. soybean stocks on December 1, 2016 totaled 2.895 billion bushels. The inventory is an all-time high for December and tops last year’s former peak of 2.714 billion. However, considering that the 2016 crop exceeded the 2015 harvest by 380 million bushels, the December stocks reflect a moderate year-to-year rise.

    This outcome was precipitated by record use of soybeans for the first quarter of 2016/17. For September-November 2016, cumulative soybean exports totaled 932.5 million bushels–141 million ahead of last season’s pace. Similarly, the domestic soybean crush for September-November 2016 totaled an all-time high 484.9 million bushels.

    Although the demand outlook for soybeans could stay strong for a bit longer, a seasonal decline is imminent. New export sales commitments are already slowing as shipments from Brazil are starting to accelerate. U.S. export shipments in the summer quarter are likely to fall well short of the surprisingly large 2015/16 windfall. USDA’s 2016/17 forecast of soybean exports is unchanged at 2.05 billion bushels.

    The 2016/17 forecast of the domestic crush is also unchanged at 1.93 billion bushels. Despite the absence of a revised crush forecast, USDA sees 2016/17 soybean meal production down 200,000 short tons this month.

    The decline is attributed to a downward revision in the meal extraction rate, which in November slumped to a 28-year low. Domestic consumption of soybean meal is exhibiting slow–but steady–growth. Export shipments of soybean meal for October-December were solid but sales commitments have fallen 7 percent from a year ago.

    Grain Commentary

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    Thus, meal exports for 2016/17 are forecast 200,000 tons lower this month to 11.6 million, compared to 12 million in 2015/16. Soybean meal prices have remained steady so the 2016/17 average price forecast is unchanged at $305-$345 per short ton.

    In contrast, an above-average oil extraction rate is related to this month’s increase in 2016/17 soybean oil production by 100 million pounds. With no changes this month in the expected use of soybean oil, season-ending stocks are seen 100 million pounds higher to 1.652 billion.

    A more ample supply outlook for soybean oil will sustain pressure on prices. USDA lowered its forecast of the 2016/17 average price to 34-37 cents per pound from 34.5-37.5 cents last month.

    By the end of the summer quarter, the rate of decline in U.S. soybean stocks is seen considerably slower and–compared to last year–stocks could accumulate. USDA forecasts August 31 soybean stocks to more than double to 420 million bushels from the 2015/16 ending stocks of 197 million bushels. Yet, this month’s reduction in supply cut the ending stocks forecast by 60 million bushels from last month and will provide support for prices. USDA forecast the U.S. average farm price for 2016/17 at $9.00-$10.00 per bushel this month, compared to $8.70-$10.20 previously.

    Ample Canola and Sunflowerseed Supplies Encourage Demand

    Oilseeds other than soybeans will contribute to the large increase in 2016/17 domestic oilseed supplies, as well. At 1.71 million acres, U.S. farmers planted 4 percent less canola in 2016/17 than the previous year.

    Even so, U.S canola production is estimated at an all-time high 3.075 billion pounds as favorable summer weather raised the national average yield to a record 1,824 pounds per acre. The primary increases in production are due to larger harvests in North Dakota and Washington.

    Despite a larger domestic canola crop, stronger demand is anticipated to lead a sharp recovery in imports this year. U.S. canola imports for 2016/17 are forecast surging to nearly 1.7 billion pounds from 780 million in 2015/16. Compared to a year earlier, June-November 2016 imports were up by 122 percent.

    Canadian canola exporters are countering a sharp decline in import demand by China by shipping more into the United States. Since domestic canola processors can now access a more abundant supply, the 2016/17 crush is forecast rising to a record 4.35 billion pounds, compared to 3.4 billion in 2015/16.

    A record domestic output of canola oil and meal does not mean a slowing of imports of these products, either. Robust growth in the consumption of canola oil and meal is anticipated with imports from Canada supplementing domestic output. U.S. canola oil imports are forecast increasing in 2016/17 by 104 million pounds to 4.06 billion. Likewise, canola meal imports may expand 5 percent to 4.2 million short tons.

    The U.S. sunflowerseed harvest for 2016/17 contracted 9 percent to 2.66 billion pounds. All of the decline stems from a 14-percent reduction in planted acreage to 1.6 million acres. A larger crop reduction was prevented by an increase in the national average sunflowerseed yield to a record 1,731 pounds per acre from 1,625 pounds in 2015.

    The main contributors to this outcome were historically good yields in North Dakota and South Dakota. Non-oil type sunflowerseed varieties accounted for 95 percent of the total drop in 2016/17 production. Yet, a slight decline in oil-type sunflowerseed production will be more than offset by large beginning stocks, so that total supplies are expected to increase by 5.5 percent.

    These would aid a 15-percent increase in the 2016/17 crush to 1.3 billion pounds. Season-ending stocks are expected to tighten, but mostly for non-oil type sunflowerseed.

    Flaxseed sown acreage in 2016/17 declined 19 percent to 374,000 acres. The lower acreage is estimated to have reduced U.S. flaxseed production 14 percent from 2015/16 to 8.7 million bushels. But like other Northern Plains oilseeds, the flaxseed yield was buoyed to a record 23.7 bushels per acre by favorable growing conditions. Most of the production decline occurred in North Dakota, which accounted for 91 percent of U.S. flaxseed output.

    Despite this season’s lower crop, 2016/17 flaxseed demand will be supported by ample carryover stocks left over from the abundant 2015 harvest. Stability in flaxseed supplies has pressured farm prices well below the year-ago level.

    Peanut Production Shrinks but Cottonseed Supplies Improve

    U.S. acreage sown to peanuts in 2016/17 increased nearly 3 percent from last year to 1.67 million acres, with an increase in Texas offsetting declines in other States. But USDA also lowered its 2016/17 yield estimate for peanuts to 3,675 pounds per acre. In Georgia, crop conditions deteriorated throughout the summer as unirrigated peanuts were hurt by an extended period of dryness and high temperatures.

    Lower yields decreased the U.S. production estimate by 559 million pounds from the previous forecast to 5.685 billion. Compared to the 2015/16 harvest, this season’s production is down 5 percent.

    With lower supplies and higher prices, peanut use may slow, particularly for the export market. Export demand in 2016/17 for U.S. peanuts is forecast to decline to 1.35 billion pounds from 1.54 billion in 2015/16. However, the contraction of supplies is forecast to tighten season-ending peanut stocks to 1.68 billion pounds, down from the 2015/16 carryout of 1.79 billion.

    U.S. cottonseed production for 2016/17 swelled 34 percent from 2015/16 to 5.4 million short tons based on higher acreage and improved yields. In 2016/17, the estimated harvested acreage for cotton expanded to 9.5 million acres from 8.1 million in 2015/16.

    With the exception of North Carolina and Virginia, more cotton acreage was harvested in every State. Improved supplies have eased cottonseed prices, which will aid a recovery in crush and feed demand this year. The cottonseed crush in 2016/17 is forecast to expand 30 percent to 1.95 million tons while feed use may increase 31 percent to 3.2 million tons.

    Full report.

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