On December 9, the USDA released the World Agricultural Supply and Demand Estimates report for December. Despite strong U.S. soybean export numbers in the early part of the marketing year driven by Chinese imports, the USDA maintained the forecast of 2016-17 marketing year exports of U.S. soybeans at 2.05 billion bushels. The lack of change in the soybean export forecast surprised some soybean market observers. The potential for strong South American soybean export competition in the second half of the marketing year is the limiting factor in expanded U.S. soybean exports.
The USDA’s Foreign Agricultural Service World Production Report estimated the size of the 2016 crop for major South American producers (Brazil, Argentina, Paraguay, Bolivia, and Uruguay) at 6.15 billion bushels and forecasted the 2016-17 soybean crop to be 6.40 billion bushels. The report noted favorable planting and growing conditions in Brazil for the soybean crop that allowed early planting and the potential for an early start to the soybean harvest. The early harvest could begin as soon as January. Compared to 2015-16 production, the Brazilian crop is forecast to be 202 million bushels larger and the Argentine crop is expected to be 7.35 million bushels larger in 2016-17. While the actual crop size will not be known for several months in South America, the current weather conditions point to a large Brazilian crop with some concerns for Argentinian soybean production due to a dry weather pattern.
Brazil, Argentina, and Paraguay are major soybean exporters in South America. Estimates for Brazilian soybean exports in 2015-16 are at 1.99 billion bushels, and 2016-17 Brazilian soybean exports are forecast at 2.15 billion bushels. Argentine forecasts for 2016-17 were reduced by approximately 9 million bushels in the December report to 330.7 million bushels. This forecast is a 33.8 million bushel reduction in Argentinian soybean exports from the 2015-16 estimate of 364.5 million bushels. Estimates for Paraguayan soybean exports in 2016 are at 194.74 million bushels, and 2016-17 Paraguayan soybean exports are forecast at the same level of 194.74 million bushels. Overall, South American exports for Brazil, Argentina, and Paraguay are forecast to be 2.67 billion bushels for 2016-17. This forecast is 113.9 million bushels larger than the 2015-16 estimate of 2.56 billion bushels.
The 2.05 billion bushel forecast for U.S. soybean exports during the 2016-17 marketing year is the largest on record. When confronted with large South American supplies, the soybean export magnitude is due to the demand from China. China is forecast to import 3.169 billion bushels of soybeans in the 2016-17 marketing year. The Chinese import forecast level is 101.78 million bushels higher than the 3.058 billion bushel import estimates for the 2015-16 marketing year.
Census data on U.S. soybean exports to China in the 2014-15 and 2015-2016 marketing years indicated 1.085 billion bushels and 1.116 billion bushels respectively. Current U.S. Census Bureau trade data for soybeans is only available through October but shows strong export growth to China. Soybean exports to China through October 2016 are at 418 million bushels which are 30% larger than soybean export levels in the 2015-16 marketing year over the same period. U.S. soybean exports to China exhibit a pattern of strong export levels in the first half of the marketing year and then dissipation through the second half of the marketing year as South American production becomes available to the world market. Over the last five years, U.S. soybean exports to China slow appreciably in January and February. When considering soybean exports to China over the last five marketing years, over 85 percent of total U.S. soybean exports for a given marketing year were complete by the end of February in all marketing years concerned except 2011-12.
Through the week ending on December 3, the Foreign Agricultural Service Export Sales report set net sales of U.S. soybeans at 53.71 million bushels sold during the week. The continued strength in soybean sales is driven mostly by Chinese demand. Cumulative export inspections for the marketing year were reported at 957.33 million bushels. Outstanding sales through the same period are reported at 630.52 million bushels. Total commitments of soybean exports as a percent of the WASDE forecast level of 2.05 billion bushels are at 77 percent. Total commitments of soybean exports as a percent of the WASDE forecast level at this point in the marketing year ranged from 60 percent to 84 percent over the last five marketing years and place this year’s level slightly above average.
Soybean export levels appear sustainable, but there is understandable caution related to the U.S. soybean export forecast. While the potential exists for surpassing the soybean export forecast this marketing year, developments over the next few weeks in South American crop production and Chinese soybean buying patterns will be crucial in determining U.S. soybean export levels and, in turn, possible price movements in soybean markets.
USDA, Economics Research Service. World Agricultural Supply and Demand Estimates (December 2016). Released December 9, 2016. http://www.usda.gov/oce/commodity/wasde/
USDA, Foreign Agricultural Service. World Agricultural Production (December 2016). Released December 9, 2016. https://www.fas.usda.gov/data/world-agricultural-production
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