Record soybean production, brighter exports

Market prices are projected to average $5.90 per bushel in 2004/05.

The higher production, according to the report by USDA’s Interagency Commodity Estimates Committees that was presented at the annual Agricultural Outlook Forum at Arlington, Va., will be due to higher planted area and to an expected recovery from the adverse conditions that held 2003 yields to the lowest level since 1993.

Soybean harvested area is forecast at 73.2 million acres, says William Tierney, commodity analyst for the World Agricultural Outlook Board, Office of the Chief Economist, USDA, who presented the report.

“Although disease pressure and dry conditions in key areas have limited growth in recent years, a return to more normal late summer weather patterns and better, more timely pest management are expected to boost yields this year.” The analysts are predicting a 2004 average yield of 40 bushels, well above last year’s 33.5 bushels, although slightly below the 1994 record of 41.4 bushels.

The projected yield is based on regional yield trends for 1978-2002 and reflects the expected planting increases in the Plains and eastern Corn Belt. Soybean supplies for 2004/05 are projected to be 18 percent above 2003/04. The higher production will be partly offset by lower beginning stocks, estimated at a 27-year low of 125 million bushels.

Domestic disappearance of soybeans is projected at 1.79 billion bushels, up sharply from last year, and the first annual increase since 2001/02. Soybean crush is forecast at 1.635 billion bushels, up 12 percent from last year. Domestic soybean meal demand is projected to increase by 8 percent as soybean supplies increase and meal prices become relatively more competitive with other feed ingredients. Increased poultry production is also expected to boost consumption of soybean meal.

Domestic soybean oil use is projected to increase by about 6 percent, following a 4 percent decline in 2003/04. Although the oil market is expected to remain tight in 2004/05, increased crush and oil production will allow domestic disappearance to recover from last year’s downturn.

“Despite only limited gains for soybean oil exports over the very low levels for 2003/04, ending stocks of soybean oil are projected to recover only modestly to 1. 2 billion pounds,” Tierney says. “Prices are forecast at 26 cents per pound, down 3 cents from the midpoint of last year’s range.”

Growth in foreign oilseed and meal production has more than offset lower U.S. oilseed production over the last two years, he says.

“Rapidly expanding soybean production in South America has accounted for much of the growth, helping to push world oilseed production to new record levels for eight consecutive years. For 2004/05, the trend toward increasing global oilseed production is expected to continue, led by increasing U.S. production. Higher planted area and a return to more normal yields in the U.S., combined with larger South American crops, especially in Brazil, could result in up to a 7 percent increase in global oilseed output this year. Only moderate growth in other oilseeds is expected.”

Gains in global soybean imports will depend primarily on increases for China, Tierney says. “Modest protein consumption growth for other regions, including the European Union and other Asian countries, will slow the rate of growth in overall global import demand from the 2002/03 level. Although South American soybean production is expected to increase again in 2005, better U.S. crop prospects and lower prices may dampen the rate of expansion of South American production and exports, particularly in Argentina.”

The outlook for U.S. exports, he says, is “considerably brighter” than for 2003/04. “A much larger and more competitively-priced crop will enable U.S. soybean exports to recover to a projected 1.06 billion bushels, up 18 percent from the level projected this year. U.S. soybean meal exports are also expected to rebound to 5.6 million short tons, up about 30 percent.

“After slumping sharply in 2003/04, the U.S. export share is expected to recover to about 41 percent of world soybean exports, and 11 percent of global soybean meal trade. Although higher than 2003/04, projected export shares for this year reflect continuation of the downward trend seen in recent years.”

Following two years of declining U.S. soybean oil exports, including a sharp downturn for 2003/04, the outlook for this year is “only slightly improved,” Tierney says. “Despite a larger crop and expanded soybean crush, the domestic vegetable oil market is projected to claim the biggest share of increased production. Strong competition from South American soybean oil buyers will hold U.S. soybean oil exports to a projected 1.1 billion pounds, up modestly from last year, but still only about half of 2002/03 export levels.”

Soybean ending stocks for 2004/05 are forecast at 210 million bushels, up 85 million bushels from the projected level for 2003/04. “The ending stocks-to-use ratio of 7 percent would be above the 2003/04 level of 5 percent,” Tierney says, “and would be the highest in four years.”

Relatively high soybean prices toward the end of the 2003/04 marketing year and projected strong corn prices for 2004/05 will partly offset the effect of increased U.S. stocks, record-large South American soybean crops expected tin 2004 and 2005, and limited growth in foreign soybean import demand.

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