Could Soybean Stocks Grow to 580 Million
Depending upon how you do the numbers there could be an enormous supply of soybeans in the U.S. by the time the fall of 2018 rolls around.
The large soybean crop in the United States hasn’t, yet, pummeled prices in Chicago. However, farmers are a bit worried the hammer blow will be struck. For now, much of the focus is on the potential size of the 2017 South American crops and the implications for demand for U.S. grown soybeans. Increasingly, however focus will shift to 2017 production prospects here in the United States.
The over-riding question is whether surpluses and low prices will persist for another year. Although University of Illinois Agricultural Economist Darrel Good says it is a bit early to speculate on supply and consumption prospects for the 2017–18 marketing year, he thinks some scenarios can be considered.
For soybeans, there is a general expectation that U.S. producers will increase acreage in the year ahead. An increase of about five million acres, to 88 million harvested acres, seems to be a common expectation right now. The extremely high soybean yields of the past three years raise some questions about a potential increase in the trend yield. However, if the 2017 U.S. average soybean yield is near our calculated linear trend value of 47.5 bushels and acreage is increased as expected, the 2017 crop would total 4.18 billion bushels, 181 million bushels less than the 2016 harvest. If soybean consumption during the 2017–18 marketing year remained at the elevated level of 4.108 billion bushels projected for the current year, stocks would grow by about 100 million bushels.
So, at the end of the 2017–18 marketing year there could be 580 million bushels of soybeans left in the supply category as ending stocks. The upshot writes Good in his Weekly Outlook is that with a trend yield of 47.5 bushels and a constant level of consumption, any increase of more than 2.85 million acres next spring would result in some further growth in year ending stocks.
Quote Summary - On the other hand, a five million acre increase in soybean area along with a constant level of consumption means that an average yield of less than 46.3 bushels would result in some increase in marketing year ending stocks.
There are obviously multiple potential acreage, yield, consumption, and ending stocks scenarios for the 2017–18 U.S. soybean marketing year. The most likely scenarios tend to favor a modest to large increase in marketing year ending stocks of soybeans. However, the soybean market is apparently not convinced that stocks will continue to grow next year, with the January 2018 futures price only $0.06 lower than the January 2017 price.
The soybean market, concludes Good, then appears to be reflecting some production risk. He thinks this perceived risk may stem from current drought conditions in the southeastern United States and/or uncertainty about potential impacts if a La Niña episode unfolds in South America.