Soybean production down, supplies tight

By Blake Jackson

The 2023 US corn and soybean crops have not held up to lofty pre-season expectations and it is likely both will record below trend yields for the second consecutive year. The United States Department of Agriculture lowered both national corn and soybean yields 0.8 and 0.5 bushels/acre, respectively, in the October Production Report.

The relatively tight supplies of soybeans and the decline in US soybean production in October suggests the soybean balance sheet is vulnerable, especially if the US crop declines further or weather challenges threaten the infant Brazilian crop. The market's attention will shift from US production to South American production by Thanksgiving.

Soybean Supply

US supply remains tight heading into 2024 due to reduced harvested area, flat yield, and lower beginning stocks. The expected 2023/24 ending stocks to use ratio of 5.3% is down from 6.2% in 2022/23. The Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri anticipates the stocks to use ratio rebounds in 2024/25 on stronger US production.

China, the world's largest buyer of soybeans, also is facing tightening supplies. While drought reduced soybean production in the US, heavy rains and flooding reduced Chinese soybean production.

Soybean Demand

China's soybean imports from the world for the year ahead are forecasted just slightly under the record set last year. China's commitments of US soybeans are still behind the seasonal average, but sales picked up in October.

Continued growth in domestic use of soybean oil and domestic soybean crush. US biomass-based diesel production capacity continues to grow. In two years, capacity has increased 68%. Almost all the growth comes from rapid growth in renewable diesel production to serve domestic markets. FAPRI expects domestic soybean crush to increase 90 million bushels this year over last year and continue to increase the next five years. This assumes no federal or state policy changes as FAPRI considers only current policy. The rate of expansion could be quicker if states considering policy changes do in fact pass legislation to create or expand renewable fuel programs.

Photo Credit: gettyimages-zoran-zeremski