Soybean Outlook Getting Heavier

U.S soybean producers may be planning to plant fewer soybeans in 2020 than expected, but that doesn’t mean there’s any kind of a bullish scenario setting up.

In a webinar last week, Purdue University ag economists Michael Langemeier and James Mintert said the expected soybean planted area of 83.5 million acres - up from 76.1 million a year earlier but below trade guesses closer to 85 million – and a trend yield of 49.6 bu/acre could produce a crop of nearly 4.1 billion bu, potentially the fourth highest on record.

“We were at close to 4.4 billion bu for a couple years in a row (in 2017 and 2018) so it’s not quite to that level,” Mintert said of 2020 crop potential. “But that’s still a lot of soybeans.”

Also bearish, he said, is the likelihood that a heavier-than-expected supply will be carried over from the current 2019-20 crop year into 2020-21.

Although large livestock inventories will likely mean the 2019-20 domestic soybean crush comes in close to the current USDA estimate of 2.1 billion (up slightly from 2.09 billion a year earlier), Mintert said it appears exports will fall short of the forecasted 1.825 billion bu. Indeed, actual year-to-date sales and commitments were running as much as 14% behind the needed pace as of mid-March and the negative economic impacts caused by covid-19 mean trying to make up ground will be difficult.

“It’s going to be tough to catch up because of the weak economy,” Mintert said.

In last month’s supply-demand update, the USDA left its 2019-20 U.S. soybean ending stocks estimate unchanged from February at 425 million bu, representing a stocks-to-use ration around 10%. However, given the possibility exports won’t measure up, Mintert said that old-crop stocks-to-use ratio could ultimately rise to around 15%.

A heavier total supply will ultimately weigh on prices, with Mintert estimating the season average soybean price for the current marketing year could eventually settle out at around US$8.50/bu, down from the USDA’s projection of $8.70.

Source: DePutter Publishing Ltd.

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