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"Current strength may be more related to concerns about soybean
rust than adverse weather conditions," said Darrel Good. "The
concern about the spread of soybean rust increased with the
recent tropical storm, although spore production in Florida and
Georgia appears to be at very low levels." Good's comments
came as he reviewed the USDA's June report on world crop supply
and consumption prospects and its effect on the soybean market.
The report contained a number of changes for U.S. soybeans and
also contained the first projections for the 2005-06 soybean
marketing year for the rest of the world.
"For the current U.S. marketing year, the USDA now projects
the domestic soybean crush at 1.675 billion bushels -- 25
million larger than the May projection and only 10 million less
than the record crush of 2001-02," said Good. "The larger crush
is expected to lead to a significant increase in the level of
year-ending soybean oil inventories. Those stocks are projected
at 1.526 billion pounds -- 450 million larger than stocks at the
beginning of the year and 285 million larger than projection
last month.
"The larger domestic crush is being driven by soybean meal
consumption. Domestic use of meal is projected at 33.9 million
tons, 450,000 above the May projection. Meal exports are
expected to reach 6.1 million tons, 100,000 above the May
projection."
Exports of U.S. soybeans during the current marketing year
are now projected at 1.11 billion bushels, which is 10 million
larger than the May projection and 110 million larger than
projected in September 2004.
Year-ending stocks are projected at 320 million bushels.
"Stocks at that level would be the largest in six years but
would be 140 million bushels less than projected in December
2004," Good noted. "If the 2004 crop was a bit smaller than the
current USDA estimate of 3.141 billion bushels, as suggested by
the December and March grain stocks report, year-ending stocks
may be near 300 million bushels."
While year-ending stocks of U.S. soybeans will be ample --
well above the 150 million to 180 million generally considered
as "tight" -- the smaller projection results in increased
importance in the size of the 2005 crop. The June acreage report
will provide an update on actual planted acreage of soybeans.
"In general, the market believes acreage may be less than
March intentions of 73.91 million acres, due to a combination of
increased acreage of corn and some prevented plantings in
extremely wet areas," said Good. "Yield expectations will be
based on weather conditions and the USDA's weekly report of crop
conditions. If current crop ratings, 62 percent good or
excellent, persisted through the end of the growing season, a
national average yield near 41 bushels would be expected.
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"The USDA's calculated trend yield is 39.9 bushels, projecting to a
crop of 2.895 billion bushels. Production at that level, in
combination with a 30-million-bushel increase in consumption, would
result in Sept. 1, 2006, stocks near 250 million bushels."
For the rest of the world, the largest changes in estimates were
for the 2003-04 marketing year, not the current year. Specifically,
the 2004 Brazilian crop is now estimated at 1.855 billion bushels,
77 million less than the previous estimate. The 2005 harvest in
Brazil is estimated at 1.95 billion bushels, the same as projected
last month. Production in all of South America in 2005 is estimated
at 3.62 billion bushels, 320 million larger than the 2004 crop.
"For the year ahead, soybean area in South America is expected to
increase only 1.4 percent, well below the 5.3 percent increase
experienced this year," said Good. "Area in Brazil is expected to
increase by about 1 percent. Average soybean yields were low in
Brazil and Paraguay in 2004 and 2005 and in Argentina in 2004.
"For the 2006 harvest, the USDA projects an average South
American yield of 39.3 bushels per acre, compared to 34.7 bushels in
2004 and 36.1 bushels in 2005. Still, that projection is well below
the record average yield of 42 bushels in 2003."
The 2006 South American crop is projected at 3.99 billion
bushels, 370 million larger than the 2004 crop. Production at that
level would likely lead to a significant increase in South American
inventories, keeping world stocks at a record level, Good noted.
The USDA's projection of average farm price of soybeans during
the 2005-06 marketing year is in a range of $4.95 to $5.95 -- 25
cents higher than last month's projection. At the level of trading
early on June 13, the futures market reflected a 2005-06
marketing-year average farm price near $6.65 -- more than $1 above
the midpoint of the USDA projection. The average price projected
from the historical relationship between year-ending stocks and
price (using the USDA's projection of use and stocks) varies
significantly depending on which historic period is assumed to
represent the current period.
"Based on the generally low price period of 1998-99 through
2002-03, the average price during the year ahead would be expected
to be near $5," said Good. "Based on the higher price period of
1989-90 through 1997-98, the average would project to about $3.65."
[News release from the
University of Illinois College
of Agricultural, Consumer and Environmental Sciences]
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