Near-record 2013 soybean crop will be a recovery year

by Laura Lloyd
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KANSAS CITY — This year’s soybean crop looks a bit like an also-ran compared to the expected record corn crop of close to 14 billion bus, but 2013 represents an important recovery year for the oilseed that suffered significant yield damage last year as a result of the drought afflicting most of the Midwest and High Plains.

The U.S. Department of Agriculture in its first survey-based estimate of the season forecast U.S. 2013 soybean production at 3,255 million bus, down 5% from the July trend-based projection and below trade estimates of 3,336 million bus, but up 8% from last year and, if realized, still the third-largest soybean crop on record, trailing 2009 and 2010.

The 2013 crop has rebounded with the wetter, cooler weather pattern this year. But the current beneficial growing conditions have come at a price: delayed planting, slower-than-ideal plant development, and the risk of a freeze that could inflict last-minute damage to the crop shortly before harvest, said Brian Harris, principal and chief financial officer at Global Risk Management in Tampa, Fla.

One impact of the later-than-average planting was a drop of 500,000 acres in forecast planted and harvested area from the U.S.D.A.’s June Acreage report. The U.S.D.A. re-contacted growers in 14 states who had indicated acreage as not yet planted when surveyed for the June report. The result was estimated planted soybean area at 77.2 million acres, down from 77.7 in June, and harvested area forecast at 76.4 million acres, down from 76.9 million acres in June. If realized harvested area would be up slightly from 2012 and the second highest on record.

Mr. Harris noted that only 58% of the crop in the 18 major states was setting pods as of Aug. 11, down 10 percentage points from the five-year average, meaning the crop may be vulnerable to a “potential freeze event into the first or second week of September.” He added that, despite the overall cool, wet spring and summer in the Midwest, there continue to be pockets of excessively dry conditions, specifically in western Iowa.

Soybean yield was forecast at 42.6 bus an acre, up 3 bus, or 8%, from 39.6 bus an acre in 2012 and the fifth highest on record if realized, the U.S.D.A. said. The U.S.D.A. forecast was below the average trade expectation of 43.6 bus an acre.

In its August World Agricultural Supply and Demand Estimates, the U.S.D.A. projected U.S. soybean carryover on Sept. 1, 2014, at 220 million bus, down 75 million bus, or 25%, from the July projection but up 95 million bus, or 76%, from 125 million bus in 2013. The 2014 number was well below the average trade estimate of 263 million bus.

The U.S.D.A. also reduced domestic use and export projections for next year, based on reduced supplies and higher prices. The 2013-14 soybean crush was projected at 1,675 million bus, down 20 million bus from July and down 10 million bus from 2012-13. Exports were projected at 1,385 million bus, down 65 million bus from July but up 70 million bus from this year, with South America, mainly Argentina, likely to get the extra business lost by the United States, the U.S.D.A. said.

Overall, though, Mr. Harris is a bit more bearish than the U.S.D.A., estimating the average soybean yield at 43.2 bus an acre, slightly above the current U.S.D.A. estimate of 42.6 bus per acre.

“That would mean ending stocks of approximately 250 million bus versus the 220 million bus projected by U.S.D.A.,” he said, which he noted would be enough to make the market feel more comfortable about stockpiles and lead to further long-term price erosion.

He said the market is currently looking for continued benign weather that will allow the crop to finish maturing well and escape any early freeze damage so there would be “a slow fade in price.”

A strong level of export demand, particularly from China, will promote underlying support for soybeans in a range of $10.50@13 a bu in the short term, Mr. Harris said, compared to the U.S.D.A.’s season-average farm-gate price of $10.35@12.35 a bu.

Mr. Harris said he did not expect soybean prices to go below $10 a bu in 2013, although he didn’t rule it out in early 2014. South American soybean production is likely to expand on increased fall planted acreage.

The U.S.D.A. also forecast soybean meal prices to average $305@345 a ton, up $15 from its July forecast, and soybean oil prices to average 44@48c a lb, down 3c from July, “reflecting the sharp drop in futures contract prices in the past month,” the U.S.D.A. said.

The U.S.D.A. projected the carryover of soybean oil on Oct. 1, 2014, at 1,635 million lbs, down 5 million lbs from 2013 and down 335 million lbs, or 17%, from 2012. Soybean carryover was forecast at 300,000 tons in 2014, unchanged from July, 2013 and 2012.

Mr. Harris said the oil content in new crop soybeans are likely to decline somewhat as a result of the cool, wet growing season.

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