Southern farmers reportedly have been considering switching more acres to soybeans in 2006 due to this winter's price hikes for fuel and nitrogen fertilizer. Unfortunately, growers in other regions are, too.
USDA is forecasting 2006 soybean plantings at 74 million acres, up nearly 2 million acres from the 2005. Analysts expect yields to fall below the 2005 record, but with increased plantings and large carryin stocks, supplies will be up. And higher supplies usually mean lower prices.
“The 2005 crop benefited from very timely rains in August, which contributed to a record yield of 43.3 bushels per acre,” says Ed Allen, an international grains analyst with USDA's Economic Research Service.
“The record 2005 yield is up 1.1 bushels from the previous record set in 2004, but with normal weather conditions the 2006 yield is expected to return to trend or 40.7 bushels per acre based on regional yield trends for 1978-2005.”
Allen presented the Grain and Oilseeds Outlook for USDA's Wheat, Feed Grains and Oilseeds Interagency Commodity Estimates Committees at the annual Agricultural Outlook Forum in Arlington, Va.
With the lower yield, USDA is projecting 2006 soybean production at 2.97 billion bushels, down 121 million bushels from the previous year's near-record crop. Soybean supplies for the 2006-'07 marketing year are forecast to total a record 3.52 billion bushels.
“Despite the lower production, record carryover stocks of 555 million bushels are expected to boost supplies by 178 million bushels compared with a year earlier,” Allen said.
Soybean domestic use is projected at 1.889 billion bushels in 2006-'07, up slightly from the estimate of 1.882 billion for the current year. Lower prices and increased supplies are expected to encourage domestic use, according to analysts.
The analysts estimate the 2006-'07 soybean crush at 1.73 billion bushels, up 10 million bushels from the forecast for 2005-'06. Domestic soybean meal use is projected to increase 2 percent.
“Despite lower soybean meal prices, increased feeding of corn by-products and only moderate growth in poultry and hog production will limit growth in domestic disappearance of soybean meal,” said Allen. “Soybean meal prices are projected at $165 per ton, down 4 percent from the midpoint of the 2005-'06 forecast range.”
Domestic soy oil use is projected to increase 2 percent, slightly below the rate for the previous year. “Growth is limited by trans-fat labeling requirements which are shifting some food industry users to alternative vegetable oils,” he said. “Some of the projected growth is the result of biodiesel production, but soybean oil use for biodiesel is still increasing from a very small base.”
Soybean oil stocks are expected to remain just below this year's projected record, declining only slightly in 2006-'07, the analysts said. Soybean oil prices are projected at 20 cents per pound, down 7 percent from the midpoint of the 2005-'06 forecast range.
U.S. soybean exports could be up 18 percent to 1.075 billion bushels in 2006-'07, the analysts said. With lower prices, record supplies and a more competitive dollar compared with currencies in exporting and importing countries, U.S. soybeans are expected to be more competitive in 2006-07.
“Despite slowing area expansion, record-large South American soybean production in 2005-'06 will keep export competition strong during the first part of 2006-07,” says Allen. “Lower prices, however, should lead oilseed producers in other countries to scale back sown area.”
Those lower prices are also expected to stimulate consumption and trade in soybeans and soybean meal. China will continue to dominate the growth of global soybean imports with its ample crush capacity and robust consumption of protein meal and vegetable oil.
The analysts anticipate only modest gains for the countries in the European Union, a market that still accounts for nearly half of world soybean trade and one-fourth of world soybean trade.
Allen says abundant U.S. soybean supplies in 2006-'07 will help keep domestic processors competitive in some foreign markets, but increasing meal exports from Argentina, where export taxes favor the export of meal over soybeans, are expected to flatten demand for U.S. soybean meal exports overall.
U.S. soybean meal exports are projected at 6.5 million short tons, unchanged from the 2005-'06 forecast. “At this level, the U.S. share of global soybean meal exports would continue to erode,” says Allen.
The analysts expect U.S. soy oil exports to decline slightly in 2006-'07, falling 2 percent to 1.325 billion pounds.
“China will continue to drive world soybean oil trade as its growth in vegetable oil consumption continues to surpass its need for protein meal,” Allen notes. “India is expected to import more vegetable oil since domestic oilseed production is not expected to reach the 2005-'06 level.”
Steady increases in world palm oil output will also limit stronger expansion of global soybean oil trade.
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