 "For that to be the case, the domestic crush in July and August
would have to be down sharply from the level of crush last year
and sharply below the pace in June of this year," Good said.
For old-crop soybean stocks at the end of the year to be at a
pipeline level of 125 million bushels, and to accommodate
exports of 1.33 billion bushels, the size of the domestic crush
for the year ending Aug. 31 will be limited to 1.66 billion
bushels, he said.
"That is 2.5 percent less than the crush in the previous
year," he noted.
Based on estimates from the National Oilseed Processors
Association, the domestic crush exceeded that of last year in
each of the first five months of the current marketing year
(September 2012 through January 2013). In February 2013 the
crush was about equal to that of a year ago and was less than
that of a year ago in each month from March through June. The
crush in both May and June was about 11 percent smaller than in
the same months in the previous year, he said.
For the entire 10-month period, the crush this year exceeded
that of last year by about 1.6 percent, he added.
"The crush during the final two months of the marketing year
needs to be 24 percent less than that of a year ago in order to
maintain a minimum pipeline supply by year-end. The size of the
needed reduction underscores the surprise in the timing and
magnitude of the recent collapse of old-crop soybean prices,"
Good said.
According to the expert, it’s possible that the domestic
crush could be larger than 1.66 billion bushels if exports fall
short of the 1.33-billion-bushel projection, if ending stocks
are reduced to less than 125 million bushels, or if June 1
stocks were actually larger than estimated.
"To reach 1.33 billion bushels, exports during the final five
weeks of the marketing year need to average only 4.6 million
bushels per week, only about 1.4 million above the most recent
five-week average. It appears exports will be very close to the
projected level," he said.
Year-ending stocks of 125 million bushels represent 4 percent
of projected marketing year consumption, he said.
"In recent history, the smallest year-ending stocks were 112
million bushels in 2003-04. However, those stocks represented
4.5 percent of marketing year consumption. It appears unlikely
that year-ending stocks this year could be much less than 125
million bushels," he said.
It is possible that old-crop soybean supplies are more
abundant than is implied by the June 1 stocks estimate,
requiring a smaller reduction in the domestic crush in July and
August, he added.
"There is no reason to suspect that supplies are larger than
estimated other than the recent sharp decline in prices. Still,
Sept. 1 stocks estimates have been surprisingly large in some
years, resulting in an upward revision in the estimated size of
the previous year’s harvest. The most recent examples were in
2007 and 2012, when the estimate of the previous year’s crop was
increased by 90.6 million bushels and 37.5 million bushels,
respectively," he said.
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Assuming that the 2013 U.S. soybean crop is near its potential of
3.4 billion bushels, rationing should not be an issue in the 2013-14
marketing year, Good said.
"The strength of demand for U.S. soybeans then will determine
price and magnitude of consumption," he added.
According to Good, two factors support prospects for strong
soybean demand in the year ahead. First is the expectation that
China will continue to import large quantities of soybeans, so that
U.S. exports will increase even with large crops in South America.
These expectations are supported by current export sales data
showing that China has already purchased nearly 400 million bushels
of U.S. soybeans for import during the 2013-14 marketing year. Sales
to China are about 25 million bushels larger than at this time last
year.
"The second potentially friendly demand factor for soybeans is
increasing biodiesel production. The amount of soybean oil used for
biodiesel production in the year ahead and beyond depends on a large
number of factors, including U.S. biofuels policy, the pace of
expansion in the domestic ethanol blend wall and competition from
other biodiesel feedstocks, particularly imported palm oil," he
said.
The USDA currently projects that soybean oil used for biodiesel
will reach 5.5 billion pounds in 2013-14, up from 4.8 billion pounds
this year and 4.87 billion pounds last year. The projection
represents nearly 28 percent of total projected domestic use and
exports of U.S soybean oil, he said.
"Unlike the U.S. corn market, where demand and consumption appear
to be reaching a plateau, demand prospects for soybeans appear to be
strong. If that is the case, a period of higher soybean prices
relative to corn prices would be expected," Good noted.
[Text from file received from the
University of Illinois College of Agricultural, Consumer and
Environmental Sciences]
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