Soybean future prices soar ahead of May WASDE

Nearby soybean future prices have reached their highest levels since 2012, climbing to $16.61 on May 12 from $8.49 a year earlier. China’s recovering hog herd has led to incredible export demand. A surge in corn exports as Brazil has had weather issues has helped strengthen meal demand, and the growth in renewable diesel has supported soybean oil prices.

U.S. ending stocks are projected to be at their lowest level since the 2013/14 marketing year. The March planting intentions report from USDA showed that surveyed farmers would plant fewer acres to corn and soybeans in 2021 than the industry expected. Since that time, the soybean to corn price ratio has fallen which tends to push relatively more acres into corn.

USDA’s WASDE report issued its first estimates of the 2021/22 marketing year. It projects continued tight supplies of soybeans in the U.S. despite a 12% increase in world soy production as China’s imports increase. USDA expects high levels of exports for the U.S. next year, but slightly below current year levels. More beans are crushed domestically to help provide soybean oil for increasing renewable diesel demand.

While the expectation is for continued elevated prices, many uncertainties always surround projections. China has had flare-ups of new strains of African Swine Fever that could dampen their feed demand. Weather around the world during the regional growing season is always important.

The rate that renewable diesel plant announcements are converted into actual production will heavily influence soybean oil markets. USDA will release its acreage report at the end of June, which will provide updated area numbers. At that point, the markets will get a better idea of the potential supply of soybeans for the 2021/22 marketing year.

Economist’s Note

The WASDE released on May 12 painted a strong picture for soybean demand with unchanged, tight ending stocks and a first look at 2021/22 projections. A key change in this WASDE is that renewable diesel is now broken out from Food, Feed and Other Industrial use. The Energy Information Administration has started tracking renewable diesel production, allowing USDA to estimate soybean oil use for its production. USDA now reports biodiesel and renewable diesel together as biofuel and has made historical revisions to include soybean oil use for both biomass-based diesels. The change is an effort to better track how soybean oil is being used.

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