'Strong' demand to keep soy prices high, compared with corn


Soybean prices look set to remain relatively high compared with corn, despite a jump in sowings to a record high, officials said, contrasting "strong" demand for the oilseed with tough competition in corn export markets.

The US Department of Agriculture, while restating a forecast on Thursday that US soybean sowings for 2017-18 will hit a record 88.0m acres, flagged the prospect of rising consumption of the oilseed too.

US soybean exports were forecast rising 75m bushels to a record high of 2.13bn bushels, despite enhanced competition from South America.

"Strong global demand is likely to continue into the new year boosting US export volume and lending support to prices," the USDA said, saying that world trade would "continue to be driven by China", the top importer.

While growth in Chinese soybean imports "is expected to slow on a percentage basis after nearly two decades of double-digit growth, it is still expected to record "a strong absolute increase in 2017-18".

"Continued demand growth in the rest of Asia and in the Middle East/North Africa region will provide additional support for the rise in global imports."

'Stiffer competition'

By contrast, US corn exports will fall in 2017-18 by a "sharp" 325m bushels to 1.90bn bushels, undermined by "abundant supplies and stiffer competition" from the likes of Argentina, Brazil and Ukraine.

USDA forecasts for US soybeans, 2017-18 and (year-on-year change)

Sowings: 88.0m acres, (+5.5%)

Yield: 48.0 bushels per acre, (-7.9%)

Output: 4.18bn bushels, (-2.9%)

Domestic use: 2.08bn bushels, (+1.1%)

Exports: 2.125bn bushels, (+3.7%)

Year-end stocks: 420m bushels, (unchanged)

"While attractive [corn] prices relative to other feedstuffs are expected to boost feed use and sustain demand for exports to traditional markets, increased competition will limit gains for the US share of global trade," the USDA said.

Already, the USDA flagged the potential for Brazil's exports, from its 2016-17 harvest, to "cut into the 2017-18 US shipping season".

"Ukraine has expanded its exports to Asia and increased its market share in the region - a major destination for US corn."

Corn vs soybeans

Indeed, the USDA forecast soybean prices maintaining their expanded advantage over corn which is seen encouraging growers to expand sowings of the oilseed, at the expense of the grain, in spring planting programmes.

USDA forecasts for US corn, 2017-18 and (year-on-year change)

Sowings: 90.0m acres, (-4.3%)

Yield: 170.7 bushels per acre, (-2.4%)

Output: 14.065bn bushels, (-7.2%)

Domestic use: 12.32bn bushels, (-0.6%)

Exports: 1.90bn bushels, (-14.6%)

Year-end stocks: 2.215bn bushels, (-4.5%)

Forward prices for delivery this autumn at Illinois elevators had, for soybeans, averaged $9.90 a bushel so far this month – up $1.40 a bushel year on year.

By contrast, for corn, the rise was just $0.20 a bushel to $3.70 a bushel.

"Total revenue per acre has fallen much more substantially for corn than soybeans following the apex of 2011-12 and 2012-13.

"For producers focused on managing costs in a relatively low price environment, this is expected to enhance the relative competitive position of soybeans" in planting schemes.

And farmgate soybean prices for 2017-18, forecast at $9.60 a bushel, were expected to maintain a relatively large advantage over corn prices, seen averaging $3.50 a bushel.

'Relatively large'

The forecast resilience in soybean prices comes despite expectations that US inventories of the oilseed will hold at 420m bushels over 2017-18, compared with a drop of 105m bushels, to 2.22bn bushels, expected for corn.

The USDA described its estimated corn inventory figure as "relatively large… large relative to recent history".


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