Economist: Soybean stocks could remain low through 2021

USDA projects continued record demand and tight soybean stocks, and even a large increase in planted acres may not make up the difference come fall.

Corn and Soybeans
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Record soybean demand from China continues, USDA says, driving tight stocks and high prices

The U.S. planting season is on the horizon, but even a dramatic increase in soybean acreage may not be enough to increase global stocks and moderate prices, according to an analysis from Purdue University.

New crop futures for the 2021 harvest, though still early, suggest cash prices for soybeans this fall could hover around US$12 per bushel, according to Purdue agricultural economist James Mintert. The possibility of another year of high soybean prices seems likely to prompt a “dramatic increase in soybean acreage” this summer, he said, but even the current planting projection may not be enough to bring down prices if demand from China remains steady.

Early 2021 projections have U.S. farmers planting 90 million acres of soybeans this year, Mintert said, up 7 million acres from last year. Assuming good weather over the summer and an average yield of harvest, Mintert estimated that soybean stocks would increase only slightly in 2021, allowing current price trends to continue for at least another year, if not more.

“When you think about these prior years with a tight supply situation,” Mintert said during a March 10 webinar, “they’re often caused by shortfalls such as drought. … This situation is different. In a drought, you expect reversion to average fairly quickly. This environment is different because it’s not driven by supply shortfall — it’s heavily focused on the demand side.”

China is still forecast to buy 104 million metric tons of soybeans this year—an estimate from the U.S. Department of Agriculture (USDA) that remains unchanged from previous figures released in February and that leaves the U.S. with less than 10 days’ use at the end of the season, according to Mac Marshall, vice president of market intelligence for the United Soybean Board. As a result, soybean prices remain above US$14 per bushel as of March 9.

If current demand trends continue, Mintert said, soybean prices will remain high, but the strength of future demand is far from a sure thing.

“The wild card is a big chunk of this is coming from China,” he said, “and the risk here is we don’t know what China is going to do.”

China’s demand for corn and soybeans, Mintert said, is driven by the nation’s ongoing effort to rebuild its hog herd. But the resurgence of African swine fever in China, he said, has created uncertainty about the nation’s need for additional animal feed.

Corn stocks and prices continue to follow similar trends as soybeans, with USDA issuing no major changes to its corn market projections in the latest World Markets and Trade report, issued March 9. At the current rate, Purdue economist Michael Langemeier said, corn prices would have to exceed US$5 per bushel for the potential profit margin on corn to exceed that of soybeans. Five-dollar corn seems unlikely, Langemeier said, and so U.S. farmers may favor planting soybeans this spring.

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