The small South American soybean crop of 2012 will result in much smaller inventories of that crop by the end of the year.

However, that drawdown in stocks in combination with the much larger harvest expected in 2013 suggests that the pace of consumption of South American soybeans will not have to slow.

In contrast, the small U.S. harvest this year will require a substantial reduction in consumption over the next year, according to University of Illinois agricultural economist Darrel Good. 

“The magnitude of the year-over-year reduction in consumption of U.S. soybeans that will be required is not yet known,” Good said.

“The new production forecast to be released on Sept. 12 and the estimate of Sept. 1 stocks of old-crop soybeans to be released on Sept. 28 will provide for a better estimate of the needed decline.

“Based on the USDA’s August forecasts, a reduction of 400 million bushels (12.7 percent) will be required. The pace of consumption, as revealed in weekly export reports and monthly reports of domestic crush, will be monitored to verify that the pace of consumption is slowing.”

Good reported that for the current marketing year, the USDA projects the domestic crush at 1.69 billion bushels, 2.55 percent more than crushed last year.

Through the first 11 months of the marketing year, estimates by the National Oilseed Processors Association of the size of the crush by its members exceeded the crush of a year ago by 2.88 percent. The crush was nearly 8 percent smaller in the first quarter of the year, but nearly 13 percent larger in June and July.  

The year-over-year increase in the crush has been driven by soybean meal consumption. In February, the USDA projected a year-over-year decline in soybean meal consumption of 0.6 percent in the domestic market and 3.3 percent in the export market. Earlier this month, the projections were for year-over-year increases of 4.5 and 4.6 percent, respectively.

“With only one month remaining in the marketing year, it appears the domestic crush will exceed the USDA projection by 10 to 15 million bushels,” Good said.