Washington | Reuters — Record demand for soybeans has paled in comparison to the expected sharp gains in supply, which will leave U.S. farmers and commercial operators with a growing stockpile of the oilseed even as exports and crushings continue to rise.
The U.S. Agriculture Department on Monday raised expected demand for U.S. soybeans during the 2016-17 crop year by 35 million bushels, of which 25 million for exports and 10 million for crushings.
But the already record production outlook was raised by a whopping 141 million bushels, with increased yield forecasts from top production states Iowa and Illinois leading the charge amid near-perfect growing weather during the key development month of August.
“We have a phenomenal demand story in the soy complex,” said Greg Grow, director of agribusiness for Archer Financial Services. “(But) with the much greater than normal August, rains, it is still probable that the final bean yields… could go up a bit more.”
Demand may have topped out, he added.
USDA’s forecast for 2016-17 soybean demand has risen by 136 million bushels since the government’s initial assessment in May, largely due to expectations of an additional 100 million in exports. Its outlook for U.S. production has climbed by 401 million bushels during the same period.
The benchmark Chicago Board of Trade November soybean futures contract, which tracks the crop currently heading toward maturity across the U.S. Midwest, fell 16 cents to settle at $9.64-1/4 on Monday (all figures US$). Soy futures snapped a six session winning streak.
The market may already be factoring in a huge U.S. soybean harvest that is nearly in the bag, but the possibility of another year of shortfalls in Brazil and Argentina could keep the bears at bay, said Ted Seifried, chief ag market strategist for Zaner Group.
The strong demand pull throughout 2016 was enough to limit declines as the U.S. crop flourished during the summer, and could provide support as combines roll across the Midwest this fall.
Soybean futures fell 12.6 per cent during June, July, August, outperforming corn, which plunged 22.1 per cent, and wheat, which sank 16.4 per cent, during the same time frame.
“Though there’s a bearish reaction to this report, I’m not so sure this is really that bearish of a report,” Seifried said, referring to the latest outlook from the USDA. “I think that soybeans new crop carry-over is not a big enough cushion for if something goes wrong with the South American growing season.”
— Mark Weinraub is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by P.J. Huffstutter in Chicago.