The release of the National Oilseed Processors Association soybean-crush estimates this past Friday indicated crush levels increased substantially in October. Driven by a moderate export pace for soybeans and a decent crush margin, soybean crush appears back on track for the 2019-2020 marketing year.
For the 2019-2020 marketing year, the U.S. Department of Agriculture projects soybean crush at 2.105 billion bushels in November, a decrease of 15 million bushels from the previous projection in October. Despite the decreasing of crush, the forecasted total sits 1 percent more than the previous year and at a record amount for a marketing year.
The reason for a reduced crush forecast was due to a less-than-expected crush total in September. At 162.3 million bushels, September crush came in at a decrease of 4.3 percent from the previous September.
The National Oilseed Processors Association released October crush estimates this past Friday; they were stronger than expected. The crush estimate of 175.4 million bushels in October places crush at almost 185.2 million bushels – if the difference between USDA and National Oilseed Processors Association crush estimates during the past few months stays constant. Soybean crush needs to total 1.757 billion bushels for the next 10 months, or increase by 1 percent as compared to the previous year’s total for the same period to reach the USDA’s current projection. Crush levels at that pace seem feasible under current market conditions.
Soybean meal prices increased recently from the levels seen in August and September, when they dropped to less than $300 per ton. In November’s World Agricultural Supply and Demand Estimates report, domestic-soybean-meal use stayed at 36.65 million tons, an increase of 558,000 tons from the previous marketing year’s estimate.
An expectation of expanded year-over-year production in the next two quarters in beef, pork and poultry provide support for that. Driven by African swine fever in Asia and a recent relaxing of import restrictions on U.S. poultry by China, pork and poultry production appears set to be particularly robust. But uncertainty about the outcome of trade talks continues to hang over agricultural markets. Still the scale of meat demand due to hog-herd losses around Asia provides hope for expanded production and prices in the livestock sector.
Projected soybean-meal exports decreased by 350,000 tons in the latest report. The 13.35 million tons expected for export sit 204,000 tons less than the previous marketing year’s estimate. Soybean-meal exports ended the 2018-2019 marketing year on a down note. From April to September exports came in 12 percent less than the previous year. Six weeks into this marketing year, total commitments sit 8 percent less than the five-year average during this period.
While accumulated exports increased 9 percent, outstanding sales lag the previous year’s pace by 14 percent. Lack of sales to the European Union, Japan and Vietnam account for the majority of the decrease. A slight expansion of soybean-meal exports from Argentina this marketing year alongside moderate growth from major importers may inhibit stronger soybean-meal exports this marketing year.
Soybean-oil prices exhibited strength in the past few months. Soybean-oil prices increased to more than 30.5 cents per pound, an increase of more than 3 cents from a few months ago. Vegetable-oil stocks in the world decreased due to a reduced Chinese crushing of oilseeds and reduced inventories. Reduced stocks in China bolstered imports and led to better vegetable-oil prices, particularly palm-oil prices. Stocks-to-use ratios for major vegetable oils sit at reduced levels this marketing year. World soybean-oil stocks-to-use of 6 percent indicate a decrease of about 0.7 percent from the previous marketing year.
Reduced inventories show in recent soybean-oil-export data. Accumulated exports came in at an increase of 58 percent compared to the previous year’s pace through the first six weeks. Outstanding sales have decreased slightly, but total commitments have increased 2 percent. At 1.7 billion pounds, the projection for soybean-oil exports comes in at a decrease of 241 million pounds from the previous marketing year. Tightening palm-oil supplies and increasing prices may benefit soybean oil during the near term.
The forecast for domestic use of soybean oil of 23.5 billion pounds is an increase of 2.7 percent from the previous year. Increased food and industrial uses seem probable under current conditions in the world vegetable-oil market. The projection for biodiesel use of soybean oil hitting 8.5 billion pounds may be excessive. The lack of progress on biodiesel credits in Washington combined with recent plant shutdowns looks to limit growth in that use category.
Soybean-crush levels appear set to maintain a pace for record soybean use in that category during the 2019-2020 marketing year. Both soybean-oil and soybean-meal markets contain positive demand factors as we move into 2020. The availability of soybeans may be an issue. If the trade impasse with China lacks a resolution, soybean crush looks to be the dominant use for U.S. soybeans moving into 2020. Crush totals remain poised to meet the current USDA projections.