Soybean outlook: Soybean markets sensitive to biofuel activity

WEST LAFAYETTE, Ind. — More soybean oil is being used as biofuel as opposed to strictly a food oil.

“Ten or so years ago, the quantity of soybean oil going into biofuels was pretty trivial,” said James Mintert, director of the Center for Commercial Agriculture at Purdue University, during a webinar.

“Now it’s pretty close to being on par with food usage. That’s made soybean oil, and in turn soybeans, much more sensitive to what’s taking place in the biofuels area.”

Mintert and colleagues discussed implications of the U.S. Department of Agriculture’s June Crop Production and World Agricultural Supply and Demand Estimates during the webinar.

The report projects strong growth in biofuel usages of soybean oil – 26% higher than the 2020 marketing year.

Soybean ending stocks for 2021 will still be tight.

“We’re talking about some downside risk in both corn and soybean prices,” Mintert said. “If you look at it as ending stocks as a percentage of usage, we’re still below 3% for the 2020 crop year and right at 3% projected for the 2021 crop year.”

The wild card for both the corn and soybean outlook is whether planting intentions will match up with what was actually planted.

Most expect to see more acres planted than the original report predicted, Mintert said.

“It’s going to make that acreage report very interesting and very important this year,” he said. “But I think we’re probably starting to see some expectation for larger acreage for the 2021 crop year embedded in some of the price action we’re seeing.

“Meaning the market has already moved beyond what those planting intentions were and implicitly suggesting that the carryovers into the 2021 crop year might not be as tight as what’s shown on the chart based on the current USDA numbers.”

The team shared highlights from the WASDE report.

U.S. Soybean 2020 Crop Balance Sheet

• Reduced soybean crush estimate by 15 million bushels.

• No change to projected 2020 crop exports.

• Carryover increased to 1.35 million bushels, equal to 2.9% of usage — up from 2.6% projected in May.

• No changes in the U.S. 2020 marketing year average price — still projected to be $11.25 a bushel.

U.S. Soybean 2021 Crop Balance Sheet

• Expected soybean production of 4.4 billion bushels, up 7% from 2020.

• Projected soybean crush of 2.225 billion bushels, up 2% from 2020.

• Projecting strong growth in biofuel usages of soybean oil, 26% higher than the 2020 marketing year.

• Expected exports are 2.08 billion bushels, 9% lower than 2020.

• Ending stocks increased to 155 million bushels, 20 million bushels higher than 2020.

• Ending stocks in 2021 are about 3% of usage, up slightly from 2020.

• No change in U.S. 2021 marketing year average soybean price projection of $13.85.

World Outlook

• Increased Brazil’s current soybean harvest by 37 million bushels.

• No change in estimates of Brazil’s 2022 harvest, but it’s expected to be 260 million bushels larger than this year’s crop.

• No change in estimate of China’s soybean imports from all sources.

View the complete webinar at www.youtube.com/watch?v=moVxdG0REeE.