US New Soybean Carryout would Increase Assuming USDA trendline Forecasts – 4/22/24

USDA is scheduled to release the first US soybean supply/usage balance of the 2023/24 season May 12, 2023.  The accompanying table assumes the March Prospective Plantings report and trendline usage projects published in the Baseline database. Comments on the forecasts include …

…USDA’s 2023 US soybean yield forecast appears optimistic. Our soybean yield model suggests 2023 weather conditions in the Midwest and Delta would need to be 8% better than the 1985 through 2022 average to push productivity to the USDA trendline projection. 

…USDA’s  trendline projection for new crop soybean crush assumes a significant increase in domestic soybean meal consumption and a significant gain in US soybean export sales. 

Brazil appears to have produced  a record soybean crop this season (harvest is still in progress) and has eclipsed the US as having the world’s largest soybean crop. Old crop (2023) Brazilian soybeans will be stiff competition for US soybeans even into the harvest of the 2023 season harvest. 

Unfortunately for Argentine farmers the 2023 national soybean yield in that country was only 60% of the trendline level established over the last 25+ years. A short Argentine crop is a plus for US soybean meal exporters as the bulk of the Argentine crop is exported as meal and oil. 

The planting for the Austral 2023/2024 soybean growing season is still six months away, but  NOAA’s recent El Nino warning is of interest to soybean traders as in the past El Nino has been strongly associated with above trend soybean yields in Brazil. 

November soybeans would likely trade below $11/Bu. based on the trendline forecast  and single digits possible assuming above trendline soybean yields. Soybean market bears face the risk of  $14/Bu.+ basis the November contract in a substantial weather market. 

The Corn Belt – Mississippi Delta has not suffered a major drought since 2012. We consider weather risk in each season as independent of the previous year’s outcome. Still, the run of good luck will be the longest in the post WWII period if the Soybean Belt avoids a major drought again this summer.  

The May soybean balance sheet need not strictly conform to the baseline as information available since the trendline projections were made several months ago is considered.