Grain Market Outlook

Soybean Market Outlook in Late-April 2013

April 29, 2013

Summary

On April 10, 2013 the USDA released its April World Agricultural Supply and Demand Estimates (WASDE) report.   Offsetting changes were made in projected usage among categories for the “old crop” 2012/13 marketing year (i.e., MY 2012/13).  Cumulative increases in U.S. soybean usage for domestic crushings (1.635 billion bushels or ‘bb’, up 20 million bushels or ‘mb’), exports (1.350 bb, up 5 mb), and seed (90 mb, up 1 mb) were offset by a reduction in residual use (5 mb, down 25 mb).  

On a year-to-year basis, 2012 soybean production of 3.015 bb is projected to be down from 3.094 bb in 2011.  Total supplies of 3.204 bb are down from 3.325 bb a year earlier in MY 2011/12.  Regarding U.S. soybean use, domestic crushings of 1.635 bb in “old crop” MY 2012/13 are down from 1.703 bb a year ago, while exports of 1.350 bb are down marginally from 1.362 bb a year earlier. 

Following from these changes, the USDA estimated U.S. soybean ending stocks of 125 mb – down from 169 mb a year ago – and percent ending stocks-to-use of 4.06% - a record low and down from 5.36% in MY 2011/12 and 6.55% in MY 2010/11.  The USDA left unchanged its estimate of U.S. average farm prices for soybeans for “old crop” MY 2012/13 at $13.80-$14.80 per bushel, with the range midpoint of $14.30 – up from $12.50 in MY 2011/12 and $11.30 in MY 2010/11. The key issue that may affect U.S. and World soybean markets in 2012 is that U.S. soybean stocks are estimated to be down to minimal historic carryover levels in the “old crop” 2012/13 marketing year, leaving little-or-no margin for error from potential 2013 U.S. soybean production problems that could in turn impact U.S. domestic and export demand in “new crop” MY 2013/14. 

U.S. soybean price prospects in 2013 are likely to continue to remain historically high through the remaining winter, spring, and early summer months of 2013.  Even with a large 2013 South American soybean crop and the availability of large exportable soybean supplies in May-June and a slowing of U.S. soybean exports, U.S. soybean prices are likely retain at least “moderate strength” until the 2013 U.S. soybean crop becomes available in fall 2013.  However, IF in combination with a large 2013 South American soybean crop, either a “trendline” or “above trendline” yield U.S. soybean crop occurs in 2013, THEN a significant rebuilding of U.S. soybean ending stocks and sharply lower U.S. soybean prices would likely result by fall 2013 and on into “new crop” MY 2013/14. 

KSU Projections for 2013 U.S. Soybean Markets: Updated KSU forecasts of 2013 U.S. soybean production and MY 2013/14 supply-demand and expected prices are as follows.  A) “Short Yield” Crop Scenario: 20% probability of 2.893 bb U.S. soybean crop, 4.0% S/U, $14.00-$15.00 /bu prices;  B) “Trendline Yield” Crop Scenario: 65% prob. of 3.311 bb U.S. crop, 6.3% S/U, $11.00-$12.00 /bu prices; and C) “Over Trendline Yield” Crop Scenario: 15% prob. of 3.425 bb 2013 U.S. crop, 6.6% S/U, $10.75-$11.75 /bu prices. Combining the “Trendline Yield” and “Over Trendline Yield” crop scenarios together, there is an 80% likelihood of 2013 U.S. soybean production of 3.311-3.425 bb, with ending stocks in the range of 206-220 mb, ending stocks-to-use of 6.3%-6.6%, and U.S. soybean prices in the range of $10.75-$12.00 per bushel.

On April 10, 2013 the United States Department of Agriculture (USDA) World Agricultural Outlook Board released its April World Agricultural Supply and Demand Estimates (WASDE) report.   Offsetting changes were made in projected usage among categories for the “old crop” 2012/13 marketing year (i.e., MY 2012/13).  Cumulative increases in U.S. soybean usage for domestic crushings (1.635 billion bushels or ‘bb’, up 20 million bushels or ‘mb’), exports (1.350 bb, up 5 mb), and seed (90 mb, up 1 mb) were offset by a reduction in residual use (5 mb, down 25 mb).  

On a year-to-year basis, 2012 soybean production of 3.015 bb is projected to be down from 3.094 bb in 2011.  Beginning stocks of 169 mb in “old crop” MY 2012/13 are down from 215 mb a year earlier in MY 2011/12, while imports of 20 mb are up from 16 mb a year ago.  As a result, total supplies of 3.204 bb are down from 3.325 bb a year earlier in MY 2011/12.  Regarding U.S. soybean use, domestic crushings of 1.635 bb in “old crop” MY 2012/13 are down from 1.703 bb a year ago, while exports of 1.350 bb are down marginally from 1.362 bb a year earlier.  Seed use of 90 mb is unchanged from a year ago, while residual use of 5 mb is up from 1 mb in MY 2011/12. 

Following from these changes, the USDA estimated U.S. soybean ending stocks of 125 mb – down from 169 mb a year ago – and percent ending stocks-to-use of 4.06% - a record low and down from 5.36% in MY 2011/12 and 6.55% in MY 2010/11.  The key issue is that U.S. soybean stocks are estimated to be down to minimal carryover levels in the “old crop” 2012/13 marketing year, leaving little-or-no margin for error from potential 2013 U.S. soybean production problems that could in turn impact U.S. domestic and export demand in “new crop” MY 2013/14.  The USDA left unchanged its estimate of U.S. average farm prices for soybeans for “old crop” MY 2012/13 at $13.80-$14.80 per bushel, with the range midpoint of $14.30.  The $14.30 / bu price for “old crop” MY 2012/13 is up from $12.50 in MY 2011/12 and $11.30 in MY 2010/11.    

The highly responsive “inelastic price” situation that has existed since 2006 in the U.S. soybean market is continuing as evidenced by the disproportionately large responses of soybean prices that have occurred in conjunction to changes in U.S. soybean supplies.  The forecast U.S. soybean price midpoint of $14.30 for “old crop” MY 2012/13 is record high, and up 14.4% from $12.50 in MY 2011/12.  These changes in prices follow from a decrease in total U.S. soybean supplies of 3.6% over the same period (i.e., down from 3.325 bb last year to 3.204 bb).  Similarly, “old crop” MY 2012/13 U.S. soybean prices of $14.30 /bu are up 26.5% from $11.30 /bu in MY 2010/11, while total supplies have declined 9% over the same period (i.e., from 3.495 bb in MY 2010/11 down to 3.204 bb in “old crop” MY 2012/13).

United States’ soybean supplies make up a significant proportion of World soybean export markets (37.5% in MY 2012/13).  Consequently, U.S. soybean prices are likely to continue to remain high through the remaining winter, spring, and early summer months of 2013.  Even with recent logistical problems in Brazilian ports, the record large 2013 South American soybean crop and the subsequent availability of large exportable southern hemisphere soybean supplies have slowed U.S. soybean exports considerably in recent weeks. 

Even so, World soybean export demand remains “strong enough” and World stocks appear likely to be “tight enough” that U.S. soybean prices are likely to be at least “moderately strong” until at least the 2013 U.S. soybean crop becomes available in fall 2013.   IF either “trendline” or “above trendline” U.S. soybean yields in 2013, THEN a significant rebuilding of U.S. soybean ending stocks and sharply lower U.S. soybean prices would likely result by fall 2013 and on into the coming “new crop” 2013/14 marketing year. 

KSU Projections of U.S. Soybean Price Prospects for 2013

Given the ongoing strength of World import demand for soybeans and soybean products, and the heavy reliance of the World export market on three primary countries for exportable soybean supplies (i.e., Brazil, the United States, and Argentina), U.S. soybean prices in 2013 are likely to continue to remain at least moderately high through at least the spring and mid-summer of 2013.  Prospects for record large Brazilian soybean production and exports have been partially offset by a poorer than expected Argentina soybean crop.

With uncertain prospects for U.S. soybean growing conditions in the Corn Belt, the following KSU analysis estimates that there is a 20% chance of a short soybean crop in the U.S. for the “new crop” 2013/14 marketing year, with U.S. soybean prices in the range of $14.00-$15.00 per bushel.  There is also an estimated 65% probability of an average trendline yield crop with U.S. soybean prices in the range of $11.00-$12.00 per bushel.  Lastly, there is a projected 15% probability of a record high yield large crop, with U.S. soybean prices declining to the range of $10.75-$11.75 per bushel.     

In the March 28^th Prospective Plantings report, the USDA projected that 77.126 million acres (ma) of soybeans would be planted in the U.S. in 2013 (Figure 1) – down 72,000 acres from 77.198 ma in 2012, and up from 75.046 ma in 2011, but less than 77.404 ma and 77.451 ma in 2010 and 2009, respectively.  Assuming the 2000-2011 average of 98.7% harvested-to-planted acres, then there would be 76.121 ma of U.S. soybeans harvested in 2013 (see Figure 1 and Table 1a).  This projected amount of 2013 harvested acres compares to 76.104 ma in 2012, 73.776 ma in 2011, 76.610 ma in 2010, and 76.372 ma in 2009.      

Figure 1. U.S. Soybean Planted Acreage (1973-2012) and KSU / USDA Projections for 2013

The USDA left unchanged its estimate of 2012 U.S. soybean yields to 39.6 bushels per acre (Figure 2), which is the lowest yield since 33.9 bu/ac in 2003, and 4.2 bu below the long term 1973-2011 trend projection for 2012 of 43.8 bu for 2012.  United States’ soybean annual average yields ranged from 39.7 to 44.0 bu/ac during the 2004-2010 period, followed by U.S. yields of 41.9 bu/ac in 2011, and 39.6 bu/ac in 2012 (Figure 2).

Projected 2013 U.S. Soybean Yield

For 2013, the 1973-2012 U.S. soybean trend yield projection would be approximately 43.5 bu/ac (with the U.S. 2012 soybean yield of 39.6 bu/ac and all other years included).  Projections for 2013 of both the “trendline yields” of 43.5 bu/ac and “over trendline yields” of 45.0 bu/ac are shown in Figure 2.  The rationale for an “over trendline yield” scenario follows from average positive deviations (i.e., actual soybean yields being above the longterm trend yield) being equal to 1.56 bu/ac for the 1973-2012 period.  Adding an approximate average difference of 1.5 bu/ac to the 43.5 bu/acre yield trend for 2013 equals 45.0 bu/acre. 

Figure 2. U.S. Soybean Yield Trend (1973-2012) and Projections for 2013

Given these projections of U.S. soybean harvested acreage and yields, the USDA left unchanged its estimate of 2012 U.S. soybean production to 3.015 billion bushels (bb) from January-February, up 381 mb from September 2012, but still down from an early season USDA projection of 3.205 bb in June 2012.  Projected 2012 U.S. production of 3.015 bb is down 2.6% from 3.094 bb in 2011, and down from 3.329 bb in 2010 and 3.359 bb in 2009 – but up from 2.967 bb in 2008, and 2.677 bb in 2007 (Table 1). 

Projected 2013 U.S. Soybean Production

“Trendline” Yield Scenario: Using an estimate of 78.0 million acres of soybeans planted in the U.S. in 2013, with 77.0 ma harvested and a 1973-2012 U.S. soybean trend yield projection of 43.5 bu/ac, the U.S. would produce 3.350 bb of soybeans in 2013.  These projections of 2013 U.S. soybean acreage, yields and production are shown in Table 1a.

“Over Trendline” Yield Scenario: Alternatively, if a “yield potential” or “over trendline yield” 2013 U.S. soybean yield of 45.0 bu/ac is achieved with 77.0 million harvested acres, then 2013 U.S. soybean production would equal 3.465 bb.  These production scenarios are comparable 3.329 bb in 2010 and the present record high of 3.359 bb in 2009 (Table 1a).  

Short Crop Yield Scenario: However, if another short crop yield of, say, 38.0 bu/ac is produced in the U.S. in 2013 on 77.0 million harvested acres, then 2013 soybean production would be 2.926 bb (Table 1a).     

In last year’s May 2012 WASDE report the USDA projected 73.9 ma of U.S. soybean plantings, 73.0 ma of soybeans to be harvested, 98.8% harvested-to-planted acres, 43.9 bu/ac yields, and 2012 U.S. soybean production of 3.205 bb.  Although the % harvested-to-planted acreage and yield projections are nearly equal to these KSU projections for 2013, higher forecast U.S. 2013 planted and harvested acreage leads to higher forecast of 2013 production versus the USDA’s May 2012 estimates. 

Given these preliminary / early season projections of U.S. soybean production for 2013, it appears likely that May-June USDA projections of 2013 U.S. soybean production will be larger than those in spring 2012, approaching or greater than the record high of 3.359 bb in 2009 and 3.329 bb in 2010.  

Table 1. U.S. Soybean Supply-Demand Balance Sheet: MY 2007/08 through MY 2012/13

  (April 10, 2013 USDA WASDE Report)

Estimated “old crop” MY 2012/13 beginning stocks of 169 mb is unchanged from October-March 2013 (Table 1).  Projected imports of 20 mb are unchanged from August-March.  With estimated MY 2012/13 beginning stocks of 169 mb, 2012 production of 3.015 bb, and imports of 20 mb, total supplies of U.S. soybeans are estimated to be 3.204 bb for “old crop” MY 2012/13 – unchanged from January-March, but up 419 mb from the September 2012 WASDE report.   

Since MY 2005/06, U.S. soybean total supplies are estimated to have been 2.878 bb in MY 2005/06, 3.081 bb in MY 2006/07, 3.261 bb in MY 2007/08, 3.185 bb in MY 2008/09, 3.512 bb in MY 2009/10, 3.495 bb in MY 2010/11, 3.325 bb in MY 2011/12, and now 3.204 bb in “old crop” MY 2012/13.  

Expected 2013 U.S. Soybean Supplies

Based on potential U.S. soybean acreage, yield and production scenarios, probability-weighted projections of 2013/14 U.S. soybean marketing year total supplies are provided in Table 1a.  Given weather and soil moisture information available at this time from climatologists, and the author’s judgment – probabilities of alternative U.S. soybean yield scenarios are provided with a leaning toward “mean reversion” in weather patterns and markets.  In economics the concept of “mean reversion” is the idea that various physical and economic processes tend to revert to their average or “mean” values over time.  In the case of U.S. soybean yields, the average yield over time is assumed here to be equal to the long term trend yield in this analysis (Figure 2).

In these KSU forecasts, the likelihood of a drought-induced “short crop” in 2013 is estimated to be 20%.  The likelihood of an average or “trendline” yield crop is put at 65% in the coming year.  Finally, the likelihood of an above average or “trendline plus” yield crop is put at 15% in the coming year.  Taken together, the cumulative likelihood of either an “average trendline yield” or “greater than average / over trendline yield” U.S. soybean crop in 2013 is projected to be 80%.

It is assumed here that a) U.S. soybean beginning stocks for “new crop” MY 2013/14 equal projected ending stocks for “old crop” MY 2012/13 of 125 mb, and b) that “new crop” MY 2013/14 U.S. soybean imports would be 20 mb across all three yield / crop production scenarios. 

These projections indicate that in 2013 there is 1) a 20% likelihood of a 2.893 bb soybean crop with “new crop” MY 2013/14 total supplies of 3.013 bb, 2) a 65% likelihood of a 3.311 bb soybean crop with “new crop: MY 2013/14 total supplies of 3.451 bb, and 3) a 15% likelihood of a 3.425 bb soybean crop with MY 2013/14 total supplies of 3.565 bb (Table 1a).

Table 1a. U.S. Soybean Supply-Demand Balance Sheet: MY 2012/13 - 2013/14 (KSU Projections on 4/26/2013)

In its April WASDE report the USDA raised its projection of U.S. domestic crushings, exports, and seed use, but lowered its estimates of residual use, while leaving its forecast of total use unchanged for “old crop” MY 2012/13 (Table 1 & Figure 3).    

U.S. Soybean Domestic Crushings

The USDA raised its estimated “old crop” MY 2012/13 domestic crush estimate to 1.635 bb, up 20 mb from March, up 30 mb from January, and up 65 mb from December, but till down from initial USDA MY 2012/13 projections of 1.655 bb in the May 2012 WASDE report (Table 1 & Figure 3).   Domestic soybean crush of 1.635 bb in “old crop” MY 2012/13 is down from 1.703 bb in MY 2011/12, 1.648 bb in MY 2010/11, and 1.752 bb in MY 2009/10, and is the lowest amount since 1.530 bb in MY 2003/04.  Domestic crush has trended lower since the highs of 1.808 bb, 1.803 bb, and 1.752 bb in MY 2006/07, MY 2007/08, and MY 2009/10, respectively.   

Figure 3. Trends in U.S. Soybean Use and Ending Stocks: MY 2004/05 through MY 2012/13

                    (April 10, 2013 USDA WASDE Report)

U.S. Soybean Exports

U.S. soybean exports for “old crop” MY 2012/13 are estimated to be 1.350 bb, up 5 mb from December-March, but less than initial USDA projections of what would be a record high 1.505 bb in the May 2012 WASDE report.  U.S. soybean exports in “old crop” MY 2012/13 of 1.350 are down from 1.362 bb in MY 2011/12, the record high of 1.501 bb in MY 2010/11, and the near record of 1.498 bb in MY 2009/10 (Table 1 & Figure 3).  Up until MY 2009/10, U.S. soybean exports had been trending higher on a year-to-year basis since the mid 2000’s, up from 940 mb in MY 2005/06. 

Comments on the pace of U.S. soybean exports to date in “old crop” MY 2012/13:  The 2012/13 “old crop” marketing year for U.S. soybeans lasts from September 1, 2012 through August 31, 2013.  Through April 18^th (week 33 of 52 or 63.5% of the way through “old crop” MY 2012/13) the USDA Foreign Agricultural Service (FAS) reported that 1.245 bb of U.S. soybeans has actually been shipped from U.S. ports, equaling 92.2% of the USDA’s projection of 1.350 bb for “old crop” MY 2012/13.  With additional outstanding sales of 94 mb also accounted for, total U.S. soybean export physical shipments and forward commitments equal 1.250 bb (1,035.6 mb shipments plus 214.7 mb forward sales) or 96.9% of the USDA projection of 1.339 bb for “old crop” MY 2012/13 with only 63.5% of the marketing year complete. 

Market expectations since early 2013 have been for U.S. soybean exports to sharply decline in March-April-May 2013 when exportable South American soybean supplies were to become fully available to import buyers.  The most recent-week’s pace of U.S. soybean exports relative to the USDA projection for “old crop” MY 2012/13 provides support for this perspective.  For example, 7.042 mb and 6.652 mb of U.S. soybeans were shipped for export from the U.S. for the weeks ending April 18^th and April 11^th, respectively. 

This compares with the average export shipment pace of 5.5 mb per week over the next 19 weeks of “old crop” MY 2012/13 that is needed to meet the USDA’s export projection of 1.350 bb.  Weekly U.S. soybean total shipments of 40-60 mb occurred during the January-March 2013 period – prior to the availability of South American soybeans on World soybean export markets.  United States’ soybean export shipments are showing increasing evidence of slowing considerably in late April-August 2013.

U.S. Soybean Seed & Residual Use

The USDA made a marginal increase in its estimate of “old crop” MY 2012/13 U.S. soybean seed use, projecting 90 mb (up 1 mb from a month ago), which compares to 90 mb in MY 2011/12, 87 mb in MY 2010/11, and 90 mb in MY 2009/10 (Table 1 & Figure 3).   The USDA projected residual use of “old crop” MY 2012/13 U.S. soybeans to be 5 mb, down 25 mb from January-March, and down 21 mb from December.  This compares to 1 mb in MY 2011/12, 43 mb in MY 2010/11, 20 mb in MY 2009/10, and 16 mb in MY 2008/09.

U.S. Soybean Total Use

Total use of U.S. soybeans for “old crop” MY 2012/13 is estimated to be 3.080 bb, unchanged from –February-March, but up 10 mb from January and up 49 mb from December, while being down from the USDA’s initial MY 2012/13 projections of 3.255 bb in the May 2012 WASDE report (Table 1 & Figure 3).  Projected total use of 3.080 bb for “old crop” MY 2012/13 is up from the recent low of 2.525 bb in MY 2003/04, and compares to 3.155 bb for MY 2011/12, 3.280 bb in MY 2010/11, the record high of 3.361 bb in MY 2009/10, and the range of 3.047-3.081 bb in MY 2006/07 through MY 2008/09.  Prior to MY 2006/07 total U.S. soybean usage had never reached as high as 3.000 bb per marketing year.

The USDA estimated U.S. soybean “old crop” MY 2012/13 ending stocks to be 125 mb – unchanged  from February-March, but down 10 mb from January, and also down from the initial USDA May 2012 WASDE projection of 145 mb (Table 1 & Figure 3).  The “old crop” MY 2012/13 projection of 125 mb compares to MY 2011/12 ending stocks of 169 mb, 215 mb in MY 2010/11, 115 mb in MY 2009/10, 138 mb in MY 2008/09, and 205 mb in MY 2007/08.  

The USDA’s estimate of “old crop” MY 2012/13 % ending stocks-to-use equals a 4.06%, unchanged from February-March, but down from 4.4% in January and from 4.29% in December, and is comparable to earlier USDA projections ranging from 4.19% to 4.6% for May through November 2012 (Table 1 and Figure 4).  Estimated “old crop” MY 2012/13 % ending stocks-to-use of 4.06% compares to 5.36% in MY 2011/12, 6.55% in MY 2010/11, 4.49% in MY 2009/10, 4.53% in MY 2008/09, 6.71% in MY 2007/08, and the previous record low of 4.45% S/U in MY 2003/04.  (Figure 4). 

The USDA left unchanged its estimate of “old crop” MY 2012/13 U.S. average soybean prices at $13.80-$14.80 per bushel, which is up from initial USDA projections for MY 2012/13 of $12.00-$14.00 per bushel made in the May 2012 WASDE report (Table 1 & Figure 4).  The midpoint of this projection of $14.30 /bu would be a record high, and compares to average prices of $12.50 in MY 2011/12, $11.30 in MY 2010/11, $9.59 in MY 2009/10, $9.97 in MY 2008/09, and $10.10 per bushel in MY 2007/08.  

U.S. Soybean Prices vs % U.S. Soybean Ending Stocks-to-Use:  In a continuation of the market scenario that has existed during the August 2012-March 2013 period, the April 10^th USDA WASDE report shows the relationship between U.S. soybean season average cash prices and U.S. soybean % ending stocks-to-use which has in general behaved in a manner consistent with economic theory since MY 1973/74. 

Economic theory indicates that a negative relationship typically exists between the level of stocks for a commodity and its selling price, such as between U.S. soybean % ending stocks-to-use and U.S. farm average soybean prices (Figure 5).  In other words, larger U.S. soybean supply-demand balances (i.e., higher percent ending stocks-to-use) are typically associated with lower prices, while smaller supply-demand balances are usually associated with higher wheat prices – all else being equal.  Soybean prices in Figure 5 are reported on a nominal basis (i.e., not adjusted for inflation). 

Figure 4. U.S. Soybean Ending Stocks vs U.S. Avg. Cash Prices: MY 2006/07 through MY 2013/14      
April 10, 2013 USDA WASDE Report, KSU & USDA projections for “new crop” MY 2013/14

Figure 5. U.S. Soybean Price vs % Stocks-to-Use (MY 1973/74 through Projected MY 2012/13)                                   
April 10, 2013 USDA WASDE Report

Comment on how South American Soybean Production & Exports affect the relationship of U.S. Soybean Prices to U.S. Soybean Ending Stocks-to-Use:  Although Figure 5 fits the general pattern of a negative “U.S. soybean ending stocks-to-use versus soybean price” relationship, the market impact of increasingly important South American soybean production and exports may at least partially obscure a clearer, even more definitive relationship between U.S. domestic supplies and U.S. prices. 

In recent years South American soybean exporters Argentina, Brazil, and Paraguay together have accounted for a substantial portion of the World’s soybean production – making up a combined 49.8%, 46.3% and 53.2% in MY 2010/11, MY 2011/12 and “old crop” MY 2012/13, respectively, versus 34.3%, 35.1% and 30.4% for the U.S. during the same time periods.  In terms of World soybean exports – these three South American exporters accounted for 48.5%, 51.3%, and 53.2% of World exports for MY 2010/11 through MY 2012/13, respectively, versus 44.6%, 40.3% and 37.5% for the U.S. during the same time periods. 

In early 2013, projected South American soybean supply-demand balances are likely to have a large influence on expected U.S. soybean acreage, production and ultimately prices for MY 2013/14.  Therefore, the U.S. end stocks-to-use versus price relationship in Figure 5 may not be as distinct and definitive as it is for a commodity market such as corn where U.S. supply-demand conditions have a more predominant impact on World market prices.

Expected 2013 U.S. Soybean Supply-Demand Balances and Prices

Based on potential U.S. soybean acreage, yield and production scenarios, probability weighted projections of 2013/14 U.S. soybean marketing year usage, ending stocks and prices are provided in Table 1a.  The following probability-based U.S. soybean supply-demand scenarios are based on the author’s best judgment regarding the responsiveness of U.S. soybean use and prices to varying amounts of total U.S. soybean supplies in the coming 2013/14 marketing year.

A.       “Short Yield Crop” Scenario for “new crop” MY 2013/14: 4.0% S/U & $14.00-$15.00 /bu (20% prob.)

Earlier analysis in this article indicated that there is a 20% likelihood of 2013 U.S. soybean plantings of 77.1 ma, 76.1 ma harvested, 38.0 bu/ac yields, and 2.893 bb of production (Table 1a).  Based on projected total supplies of 3.013 bb and total use of 2.500 bb, ending stocks are forecast to be 100 mb with ending stocks-to-use of 4.0%.  Based on recent history of the relationship between U.S. soybean % ending stocks-to-use and U.S. season average soybean prices, 4.0% stocks-to-use would lead to U.S. soybean prices in the range of $14.00-$15.00 per bushel (midpoint of $14.50).

B.      “Trendline Yield Crop” Scenario for “new crop” MY 2013/14: 6.3% S/U & $11.00-$12.00 /bu (65% prob.)

Earlier analysis projected that there is a 65% likelihood of 2013 U.S. soybean plantings of 77.1 ma, 76.1 ma harvested, 43.5 bu/ac yields, and 3.311 bb of production – just below the record high of 3.359 bb in MY 2009/10 (Tables 1 & 1a).  Based on projected total supplies of 3.451 bb and total use of 3.245 bb, ending stocks are forecast to be 206 mb with ending stocks-to-use of 6.3%.  Based on recent history of the relationship between U.S. soybean % ending stocks-to-use and U.S. season average soybean prices, 6.3% stocks-to-use would lead to U.S. soybean prices in the range of $11.00-$12.00 per bushel (midpoint of $11.50).

C.       “Over Trendline Yield” Crop Scenario for MY 2013/14: 6.6% S/U & $10.75-$11.75 /bu (15% probability)

Previous estimates indicated that there is a 15% likelihood of 2013 U.S. soybean plantings of 77.1 ma, 76.1 ma harvested, 45.0 bu/ac yields, and 3.425 bb of production – which would be a record high if it occurred (Tables 1 & 1a).  Based on projected total supplies of 3.565 bb and total use of 3.345 bb, ending stocks are forecast to be 220 mb with ending stocks-to-use of 7.5%.  Based on recent history of the relationship between U.S. soybean % ending stocks-to-use and U.S. season average soybean prices, 6.6% stocks-to-use would lead to U.S. soybean prices in the range of $10.75-$11.75 per bushel (midpoint of $11.25).

Combining the “Trendline Yield” and “Over Trendline Yield” crop scenarios together, for “new crop” MY 2013/14 there is estimated to be an 80% likelihood of 2013 U.S. soybean production of 3.311-3.425 bb, with ending stocks in the range of 206-220 mb, ending stocks-to-use of 6.3%-6.6%, and U.S. soybean prices in the range of $10.75-$12.00 per bushel.

D.      USDA Ag Outlook – Adjusted “Return to Normal” Crop Scenario for MY 2013/14: 7.2% S/U & $11.00 /bu

After adjusting the February 2013 USDA Ag Outlook Forum projection to account for the USDA Prospective Planting report forecast acreage for U.S. soybeans, a projection based on 2013 U.S. soybean plantings of 77.1 ma, 76.1 ma harvested, 44.5 bu/ac yields, and 3.392 bb of production is estimated (Table 1a).  Based on projected total supplies of 3.532 bb and total use of 3.295 bb, ending stocks are forecast to be 237 mb with ending stocks-to-use of 7.2%.  The KSU-adjusted USDA projection of U.S. soybean prices equals an average of $11.00 per bushel in “new crop” MY 2013/14. 

The projected supply-demand balance sheet for U.S. soybean oil in “old crop” MY 2012/13 in the April WASDE report continue reflect tight stocks and near record high prices – inspite of increasing projections of “old crop” MY 2012/13 U.S. soybean oil supplies since the November 2012 USDA WASDE report (Table 2).  These increases in soybean oil supplies followed similar proportional increases that had occurred in projected U.S. soybean crush over the same time period (Table 1).

Table 2. U.S. Soybean Oil Supply-Demand Balance Sheet: MY 2007/08 through MY 2012/13

   (April 10, 2013 USDA WASDE Report)

Beginning stocks of U.S. soybean oil are estimated to be 2.540 billion pounds (bp) in “old crop” MY 2012/13, up from 2.425 bp in MY 2011/12, but down from 3.406 bp in MY 2010/11, and 2.861 bp in MY 2009/10 (Table 2).  Soybean oil production for “old crop” MY 2012/13 in the U.S. is estimated to be 19.210 bp in “old crop” MY 2012/13 – up 135 million pounds (mp) from February-March, and up 510 million pounds (mp) from January.  This amount of production (19.210 bp in “old crop” MY 2912/13) is down from 19.740 bp in MY 2011/12, and up from 18.888 bp two years ago.  

Soybean oil imports are estimated to be a record high 350 mp, and are up from 149 mp in MY 2011/12 and from 159 mp in MY 2010/11.  The previous record high was 306 mp in MY 2003/04.  Projected U.S. total supplies of soybean oil of 22,100 bp for “old crop” MY 2012/13 – up 235 mp from March and up 510 mp from Janury.  This amount of U.S. total soybean oil supplies for “old crop” MY 2012/13 of 22.100 bp is down from 22.314 bp in MY 2011/12, 22.453 bp in MY 2010/11, and 22.578 bp in MY 2009/10. 

Estimated domestic disappearance of U.S. soybean oil for “old crop” MY 2012/13 is 18.100 bp, down from 18.310 bp in MY 2011/12, but up from 16.795 bp in MY 2010/11.  The USDA reported biodiesel use of 4.900 bp for “old crop” MY 2012/13, up from 4.870 bp in MY 2011/12, and up from 2.737 bp in MY 2010/11. 

Soybean oil exports are estimated to be 2.300 bp in “old crop” MY 2012/13 – up from 1.464 bp in MY 2011/12, but down sharply from 3.233 bp in MY 2010/11 and 3.359 bp in MY 2009/10.  Projected total U.S. soybean oil usage of 20.400 bp for “old crop” MY 2012/13 is up from 19.774 bp in MY 2011/12, 20.028 bp in MY 2010/11, and 19.173 bp in MY 2009/10. 

Soybean oil ending stocks in the U.S. are estimated to be 1.700 bp in “old crop” MY 2012/13 are down from 2.540 bp in MY 2011/12, 2.425 bp in MY 2010/11, and 3.406 bp in MY 2009/10. 

Consequently, % ending stocks-to-use are estimated to be 8.3% in “old crop” MY 2012/13 – are down from 12.9% in MY 2011/12 to the lowest level during the MY 2007/08 through MY 2012/13 period (Table 2).

Soybean oil average prices in the U.S. are projected to be in the range of $48.00 to $50.00 per cwt for “old crop” MY 2012/13 – with the midpoint of the “old crop” MY 2012/13 price range of $49.00 /cwt is down from $51.90 in MY 2011/12, the record high of $53.20 in MY 2010/11, $35.95 in MY 2009/10, $32.16 in MY 2008/09, and $52.03 in MY 2007/08.

With reduced U.S. soybean meal production and supplies, market price prospects for “old crop” MY 2012/13 are expected to remain above the levels reached over the MY 2007/08 – MY 2011/12 period.    

Estimated U.S. soybean meal production in “old crop” MY 2012/13 of 38,900 thousand short tons or “k-st” is up 450 k-st from February-March. This amount of production is still less than 41,025 k-st in MY 2011/12, than 39,251 k-st in MY 2010/11, and also less than 41,707 k-st in MY 2009/10 (Table 3). 

Estimated U.S. total supplies of soybean meal in “old crop” MY 2012/13 equal 39,550 k-st, up 450 k-st from March, 550 k-st from February and up 800 k-st from January.  This estimate is based on a) estimated U.S. soybean meal beginning stocks of 300 k-st, b) estimated production  of 38,900 k-st, and c) imports of 350 k-st (up 100 k-st).    

Table 3. U.S. Soybean Meal Supply-Demand Balance Sheet: MY 2007/08 through MY 2012/13

   (April 10, 2013 USDA WASDE Report)

Estimated U.S. domestic disappearance in “old crop” MY 2012/13 of 29,900 k-st is unchanged from February-March while being up 150 k-st from January.  This amount of U.S. soybean meal domestic disappearance is down from 31,550 k-st in MY 2011/12, and would be the lowest amount since 28,619 k-st in MY 1997/98. 

Estimated U.S. soybean meal exports of 9,350 k-st in “old crop” MY 2012/13 are up 450 k-st from March, up 550 k-st from February, and up 650 k-st from January.  However, this amount is still down from 9,741 k-st in MY 2011/12, while being up from 9,081 k-st in MY 2010/11.    

Combined total U.S. soybean meal usage of 39,250 k-st in “old crop” MY 2012/13 is up 450 k-st from March, 550 k-st from February, and up 800 k-st from January.  However, this amount is less than 41,291 k-st in MY 2011/12, and less than the range of 39,249 to 42,474 k-st over the MY 2007/08 through MY 2011/12 period. 

Projected U.S. soybean meal ending stocks of 300 k-st for MY 2012/13 and % ending stocks-to-use of 0.8% reflect typically minimal U.S. soybean meal ending stocks – given the physical perishability of the product.

Soybean meal average prices in the U.S. are estimated to be record high in the range of $430 to $460 per ton for “old crop” MY 2012/13, which is markedly above $393.53 in MY 2011/12, $345.52 in MY 2010/11, and prices in the $311-$336 range over the MY 2007/08 – MY 2009/10 time period.

Consistent growth in World soybean use since MY 2008/09 has occurred in spite of intermittent periods of record high soybean prices, with further growth projected to 260 mmt for “old crop” MY 2012/13 (Figure 6).   During this same period, World soybean production has generally trended sideways-to-higher in the range of 260.4-269.6 mmt, except for the short World crop in MY 2011/12 (i.e., 239.8 mmb).  Record high production of 269.6 mmt is again estimated for “old crop” MY 2012/13. 

Figure 6. World Soybean Usage & Ending Stocks: MY 2007/08 thru MY 2012/13                                         
(April 10, 2013 USDA WASDE Report)

Projections of more abundant South American soybean supplies in “old crop” MY 2012/13 have led to a forecast of record high World soybean exports of 97.9 mmt.  In “old crop” MY 2012/13, World soybean use of 259.8 mmt is projected to be less than World production of 269.6 mmt, leading to an anticipated increase in World soybean ending stocks from 55.3 mmt in MY 2011/12, up to 62.6 mmt in “old crop” MY 2012/13, with estimated World % ending stocks-to-use climbing to 24.1% in “old crop” MY 2012/13 from 21.5% the previous year. 

World soybean usage is estimated to be 260.0 mmt in “old crop” MY 2012/13, up from 256.0 mmt in MY 2011/12, 251.6 mmt in MY 2010/11, 237.8 mmt in MY 2009/10, and 221.0 mmt in MY 2008/09.  World soybean use is projected to have increased by an average of 7.75 mmt (+3.5%) annually from MY 2008/09 through “old crop” MY 2012/13 (Figure 6).  

World soybean production has also generally increased on average over the same time period, but on a more inconsistent basis.  After a large jump in World soybean production from 211.6 mmt in MY 2008/09 to 260.4 mmt in MY 2009/10, production moved higher to 263.9 mmt in MY 2010/11, then down to an estimate of 239.8 mmt in MY 2011/12.  However, in “old crop” MY 2012/13 World soybean production is projected to recover back up to 269.6 mmt. 

World soybean trade has followed a similar pattern to production, with lower levels of 78.7 and 76.9 mmt in MY 2007/08 and MY 2008/09, respectively, followed by a jump to 92.0 mmt in MY 2009/10 and to 91.7 mmt in MY 2010/11.   World soybean trade is estimated to have declined to 91.9 mmt in MY 2011/12, which is to be followed by a projected jump to a record high of 97.9 mmt in “old crop” MY 2012/13 with more abundant exportable World soybean supplies available. 

Brazil soybean production is estimated to be a new record high of 83.5 mmt in “old crop” MY 2012/13, unchanged from February-March, but up 1.0 mmt from January, up 2.5 mmt from December, and also up from 66.5 mmt in MY 2011/12, and up from the current record high of 75.3 mmt in MY 2010/11.      

Argentina soybean production is estimated to be 51.5 mmt in “old crop” MY 2012/13, down 1.5 mmt from February-March, and down 2.5 mmt from January.  However, this amount of production is up from 40.1 mmt in MY 2011/12, and from 49.0 mmt in MY 2010/11.  The historic record high of 54.5 mmt in Argentina soybean production occurred in MY 2009/10.     

Paraguay soybean production is estimated to be a record high 8.350 mmt in “old crop” MY 2012/13, compared to 4.350 mmt in “old crop” MY 2011/12; the previous record high of 7.128 mmt in MY 2010/11; and 6.462 mmt in MY 2009/10. 

Brazil soybean exports are projected to be a new record high of 36.8 mmt in “old crop” MY 2012/13, up from the current record high of 36.3 mmt in MY 2011/12, 30.0 mmt in MY 2010/11, 28.6 mmt in MY 2009/10, 30.0 in MY 2008/09, 25.4 mmt in MY 2007/08, 23.5 In MY 2006/07, and 25.9 in MY 2005/06. 

Argentina soybean exports are estimated to be 10.4 mmt in “old crop” MY 2012/13, which is comparable to 7.4 mmt in MY 2011/12, 9.2 mmt in MY 2010/11, 13.1 mmt in MY 2009/10, 5.6 mmt in MY 2008/09, and the record high of 13.8 mmt in MY 2007/08. 

Paraguay soybean exports are estimated to be 5.0 mmt in “old crop” MY 2012/13, compared to 3.5 mmt in MY 2011/12; 5.3 mmt in MY 2010/11; 4.7 mmt in MY 2009/10; 2.3 mmt in MY 2008/09; and 4.4 mmt in MY 2007/08. 

China

China soybean imports are estimated to be 61.0 mmt in “old crop” MY 2012/13, down 2.0 mmt from November 2012 – March 2013, but equal to October 2012.  Estimated MY 2012/13 Chinese imports of 61.0 mmt are up from 59.2 mmt in MY 2011/12, from 52.3 mmt in MY 2010/11, and from 50.3 mmt in MY 2009/10.  Strength in Chinese soybean imports has been the predominant driving factor in the World soybean market in recent years, with China projected to account for 63.9% of World soybean imports in “old crop” MY 2012/13, up from 63.5% in MY 2011/12, and from 59.0% in MY 2010/11. 

Comments on the impact of Chinese soybean imports on World soybean production: Chinese soybean and soybean product imports have been identified as one of at least two major market factors (along with growth in corn ethanol production) helping to spur prices for World soybean and soybean products in particular, and of grain markets in general, since MY 1998/99.  In recent years, growth in Chinese soybean import demand has helped to spur increased South American soybean production and also helped to bring about higher U.S. soybean planted acreage.  

Other Major Soybean Importers: EU-27, Japan & Mexico

The European Union (EU-27) is estimated to import 11.80 mmt of soybeans in “old crop” MY 2012/13, down marginally from 11.96 mmt in MY 2011/12 and 12.5 mmt in MY 2010/11.  EU-27 soybean imports in recent years have been trending down from levels of 12.47 mmt in MY 2010/11, 12.7 mmt in MY 2009/10, 13.2 mmt in MY 2008/09, and 15.1 mmt in MY 2007/08. 

Japan is estimated to import 2.75 mmt of soybeans in “old crop” MY 2012/13, which is nearly unchanged from 2.76 mmt in MY 2011/12, but down from 2.9 mmt in MY 2010/11, 3.4 mmt in MY 2009/10, 3.4 mmt in MY 2008/09, and 4.0 mmt in MY 2007/08.. 

Mexico is estimated to import 3.55 mmt of soybeans in “old crop” MY 2012/13, which compares to 3.61 mmt in 2011/12, 3.50 mmt in MY 2010/11, 3.5 mmt in MY 2009/10, 3.3 mmt in MY 2008/09, and to 3.6 mmt in MY 2007/08. 

IV-E. World Soybean Ending Stocks & % Ending Stocks-to-Use

World Ending Stocks of Soybeans: The USDA estimated “old crop” MY 2012/13 World soybean ending stocks to be 62.6 mmt, up 2.4 mmt from March, but up markedly from earlier projections such as 57.6 mmt on October, and from 53.1 mmt in September 2012.  This amount is comparable to 55.1 mmt in MY 2011/12, 70.1 mmt in MY 2010/11, 60.8 mmt in MY 2009/10, 43.4 mmt in MY 2008/09, and 52.2 mmt in MY 2007/08.  

% Ending Stocks-to-Use of World Soybeans: The USDA estimated “old crop” MY 2012/13 World soybean % ending stocks-to-use to be 24.1%, up from 23.1% in March, 22.9% in February, 22.6% in January, and up from the range of 20.7% to 23.0% over the September-December 2012 period.  This compares to 21.5% in MY 2011/12, 27.9% in MY 2010/11, 25.5% in MY 2009/10, 19.6% in MY 2008/09, and 22.8% in MY 2007/08. 

Comment on Market Impact of World Soybean % S/U trends: Tight World soybean supply-demand balances in “old crop” MY 2012/13 led to increases in World soybean prices and incentives for soybean producers World-wide to increase acreage and expected production in 2013.  Current projections are for record high soybean production in Brazil and Paraguay in 2013, and a large but not record high soybean crop in Argentina.  The level and trends in soybean prices during late March through May 2013 may also impact U.S. farmers’ 2013 corn and soybean planted acreage choices.