When it comes to soybeans, USDA’s word for June is “unchanged.”
The July World Agricultural Supply and Demand Estimates (WASDE) report confirmed many analysts’ predictions, with the U.S. Department of Agriculture making only slight changes to soybean projections. Reduced wheat harvest and yield and lower corn stocks grabbed the headlines for July’s report, which historically offers few surprises.
USDA’s soybean production estimate is unchanged from June with a projected harvest of 4.4 billion bushels. Harvested area, forecast at 86.7 million acres in the June 30 Acreage report, is also unchanged. However, soybean acreage is up significantly from last year, increasing more than 4.4 million. Bucking analyst projections, USDA left unchanged its soybean yield forecast at 50.8 bushels per acre. Soybean supply and use forecasts are also unchanged from last month.
Mac Marshall, vice president of market intelligence for the U.S. Soybean Export Council and United Soybean Board, provided an analysis of the WASDE report’s potential implications for soybean markets during a global webcast Monday. His guest on the webinar was Nagaraj Meda, managing director of Transgraph Consulting.
Current Marketing Year
USDA did offer revisions to the soy complex due to lower imports, crush, and exports. Yet, offsetting changes in supply and use left ending stocks unchanged at 135 million bushels.
The U.S. season-average soybean price for 2020/21 is forecast at $11.05 per bushel, down $0.20 as early-season sales at lower prices continue to weigh on the season-average forecast. The soybean meal price is projected at $395.00 per short ton, down $10.00 from last month. The soybean oil price is forecast at 57.5 cents per pound, down 1.5 cents.
“Even with the slight downward revision to exports, USDA is still projecting volume exports of 61.8 million metric tons (MMT), which would be a record,” Marshall said. “For reference, as of last Thursday’s export sales report, total commitments for this marketing year stand at 61.9 MMT.”
Meda was surprised ending stocks were kept the same for MY21, even though USDA revised the crush and exports downward.
“There’s a balancing act in motion,” he said. “We have a reduction of Chinese imports because global prices have gone up. It appears China does not want to carry at those high prices, so they are pushing producers to carry the costs.”
USDA again revised its export forecast for U.S. soybean oil down, this time by 125 million pounds (57 MMT) to 1.45 billion pounds – about 660,000 metric tons (MT). According to Marshall, this is not surprising given high overall domestic demand and decreased exportable volumes. Overall soybean oil inventories were reduced by 15 million pounds.
“The high basis for U.S. soybean oil reflects the tight supply,” Meda said. “It’s been quite a volatile year with two limit downs then a comeback similar to 2008. Price has responded and buyers have responded accordingly. Marketing year 2022 will be defined by soybean oil pricing.”
Among the soy derivatives, soybean oil use was adjusted among its usage categories with 200 million pounds moving from biofuels use to the food/feed/other category, which was taken up by 300 million pounds.
“Biofuel consumption has been reduced because of continued use of small refinery exemptions to the renewable fuels standard and biodiesel blending regulations,” Meda said. “While domestic demand looks to be quite good in terms of food consumption, it’s reflective in USDA changing the 300 million pounds.”
Globally, the report says higher stocks for Brazil and Argentina will be partially offset by lower than expected Chinese stocks with Brazilian exports down 3 MMT and Argentine exports down 2.65 MMT. As a result, USDA increased the global soybean ending stocks estimate for the 2021/2022 crop to 94.5 million, which is up 1.9 million tons from the June forecast.
Notably, China’s soybean imports for the current marketing year were revised down by 2 MMT to 98 MMT – though overall consumption was unchanged. The implication here, according to Marshall, is that local demand will in part be met through inventory reduction.
- Whole soybean imports were revised down by 15 million bushels (about 0.4 MMT) with the supply reduction offset by lower crush and exports.
- Domestic soybean meal use was revised down by 150,000 short tonnes while ending stocks were taken up by 50,000 short tonnes.
- Marketing year average prices were revised down for the U.S. soybean complex, with
- Whole soybean prices down $0.20/bu to $11.05/bu
- SBO prices down 1.5 cents/lb to 57.5 cents/lb
- SBM prices down $10/ST to $395/ST.
- Argentine production was taken down by half a million metric tonnes to 46.5 MMT; Brazilian production remained unchanged.
- Bangladesh, a notable growth market for U.S. Soy, had its meal demand taken up by 100,000 MT.
Revisions to the new crop in the U.S. were largely attributable to changes in carryout from the old crop (MY 20/21), according to Marshall. However, Meda was bullish on conditions in the Dakotas and Northern Plains that may bump supplies.
“Look at the broad effects of international droughts. Dryness had little overall impact in Brazil and Argentina,” he said. “It’s still early. If the weather improves, we can see some upside [in the projected soybean harvest]. Downward revision is less likely.”
Changes in 20/21 carryout for both soybean meal and oil translate into changes for 21/22 carryout — though the updates are small in magnitude, Marshall said.
Meda was more bearish on soybean oil prices, which USDA left unchanged at 65 cents/lb. He projects a 50-55 cents/lb. in 21/22 thanks to higher palm oil stocks in southeast Asia and additional sunflower oil supply.
Whole soybean prices were taken down by 15 cents/bu and meal prices were revised down by $5/ST.
- World ending stocks are 1.9 MMT higher on increased carryout from the prior season. Ending stocks for both Argentine and Brazil were revised up on higher carryin from MY 20/21.
- China’s imports for the new marketing year were taken down by 1 MMT, though as was the case with the old crop, China’s consumption was not revised.
- Canadian production was taken down by 300,000 MT on a 7% reduction in area.
- With production rebounding from this season’s dryness and estimated increased carryin, Argentine crush was revised up by a half million tonnes. Exports were also revised up by 300,000 MT.
- The upward revision to Bangladesh’s import demand for soymeal also applied to the new crop year, as USDA increased Bangladesh’s import figure for SBM up by 150,000 MT.
- Brazilian ending stocks of soybean meal were taken up by a half million tonnes.
The next WASDE report, due August 12, will provide greater insight with the first survey-based yield estimates for the 2021 U.S. soybean crop.
The WASDE is a monthly report published by the USDA. It provides a comprehensive forecast and analysis of supply and demand for major crops globally and United States. Traders, farmers, and soy processors around the world refer to the WASDE report as an indicator of supply and demand, and ultimately, pricing. USSEC hosts a monthly global webcast updating its partners around the world on the WASDE report and its potential implications for soybean markets.