For a long time, the United States was the biggest kid on the block when it came to producing and exporting soybeans.
But now we’ve got company.
“Brazil is giving us a run for our money,” says Brian Williams, Mississippi State University Extension economist.
“This last year, we edged them out in production, but just barely. If things go according to plan for Brazil next year, they’ll actually top us in production. They did top us this past year in exports, and they’re expected to do the same next year.”
Meanwhile, China — which imported 69 million metric tons of soybeans last year — is importing an additional 10 million metric tons this year.
“Brazil is limited somewhat by its infrastructure,” says Williams. “When they were bringing in a record crop last year, there was a bottleneck, and they weren’t able to export as much as they wanted. Ships were lining up at the ports and sometimes waiting weeks and months. Some of them got tired of waiting and moved on up to New Orleans, where they knew they can get loaded faster.
“So that’s working in our favor — we have the infrastructure to export large quantities, while Brazil is still struggling in that area.”
Uncertainty over size of U.S. crop
As for the U.S. crop this year, there’s uncertainty over exactly how large it will be, says Williams.
“We had an unusually cool, wet spring, and a lot of producers weren’t able to get all of their crop in, at least on time, and some of them didn’t get it in at all. There’s a potential for our acres to be quite a bit lower than what some reports are indicating,” he says.
Drier weather which moved into the Corn Belt in late summer and early fall could have an impact on soybean totals, says Williams.
“At this point of the year, much of the crop is already finished, so if it is dry, then it’ll make harvest easier and quicker. But with the late planting this year, it’s of a little bit more concern because some of that crop hasn’t been fully developed yet.
“So the question is whether or not these late-season dry conditions will have an effect on this year’s soybean yields. We were also seeing some drought creep into parts of Louisiana, Arkansas and Mississippi, but that was helped by timely rainfall.”
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The U.S. seasonal outlook for soybeans is improved this year over last year, says Williams. “Things look much better this year than last year, and hopefully that’ll be reflected in our soybean yields. The 2012 crop was not a good one in terms of yield, but the vast majority of the Corn Belt is looking as if their yields will be better than last year.
“Even the low 40s is not bad in terms of soybean yields, especially considering what they could be, and if you look at some of our yields in the Southeast.
“Iowa actually has a lower projected yield this year than last year, and they’re expected to be the No. 2 soybean-producing state this year. If the second-largest producing state is estimated to have lower yields than last year, that’s a little concerning.”
In the Southeast, only two states — Kentucky and Tennessee — are expected to have better yields this year than last.
“But those two states also were hit harder by the drought than other Southeastern states in 2012. Even though we don’t have higher projected yields overall this year, we set the bar high last year. A lot of states, including Mississippi, had record-high soybean yields last year.
If we look at acres and yields, that translates into production. We’re expecting higher production this year than last year because of low overall yields last year and an improvement in yields this year.”
The WASDE September harvested acres report estimated a crop of a little more than 76 million acres while FSA pegged it at 74.5 million.
“That’s a big difference. When you extrapolate that out, it’s a 73-million bushel difference in production. The FSA reported about 1.7 million prevented acres. Something has to give. Either the FSA is wrong or WASDE is wrong. This difference shows the potential for a shakeup in the markets.”
Soybean exports continue to look good
Turning to soybean disappearance, Williams says the two primary uses are soybean crush — to make meal and oil — and exports.
“Exports this year are looking good. They’re trending higher. Crush is down but not a lot. I don’t see demand dropping too much because of the decrease in crush. Demand is still there. All livestock numbers are supposed to be up, and a lot of the feed sources for those animals include soybeans. Whenever you have more animals, you’ve got to feed those animals. That will help to maintain soybean demand.”
Even though production is looking better this year, the U.S. is not a lot higher on ending stocks, he says.
“Right now we’re projected at 150 million bushels for soybean ending stocks. Last year, we were at 125. So we’re only 25 million bushels higher. Looking back at that 73-million bushel difference in the FSA and the WASDE reports, that’s half of what our ending stocks are projected to be this year.”
The national average soybean price last year was $14.75 to $15 per bushel, notes Williams.
“We’re not quite at that level this year, but we’re still holding strong in the soybean market, and it’s highly dependent on ending stocks. That’s the big question going forward.”
Last year, soybean futures were $17 per bushel, and that was during a drought, he adds. “And then when harvest starting coming in last year, it didn’t look quite as bad, and futures started to come down.
“Then, this past spring, we had too much moisture and couldn’t get our crop in the field. That caused prices to go up, though not as much as last year. Then, as the summer began, it became apparent that growers were getting the crop in at a record pace, so prices came back down. But during some of the Midwest crop tours, they started talking about low pod counts, and that brought prices back up.”
There’s a large variety of prices in the Southeast, and the basis seems dependant on the ability to get the crop moved out, he says. “In Louisiana, they’re pushing a basis of 90 cents to $1, but that’s a port price, near New Orleans.”
The general observation this year was that a cool, wet spring delayed planting, says Williams.
Good news at the time
“It wasn’t taken as good news at the time because late planting many times means lower yields. We’re still a little behind, but things are looking better than last year and better than this past spring.”
Moving forward, Brazil and Argentina will remain the biggest competitors to the U.S., says Williams.
“We need to keep our finger on the pulse of Brazil because ultimately they’re our biggest competition on the global market. As for the U.S. crop, we don’t know yet if the initial low pod counts will translate into low yields. It didn’t look so good at this time last year, but once the combines started to roll, it was much better than expected.”
The U.S. has the infrastructure to get its crop out and to deliver exports, he says. “Even though we’re more expensive than Brazil, it gives us an edge with those customers who don’t want to wait.
Looking ahead to next year’s soybean acreage, Williams says corn prices haven’t been holding their own as well as soybean prices, and that’ll be a factor, particularly if ending stocks end up lower than expected.
“Soybeans will be a stronger competitor for acreage next year, so at this point I think we’ll see an uptick in soybean acres for next year to offset some of the lower production this year. Price depends on the final yield and acres. A big question is how many acres did not get planted that aren’t showing up in current reports?