Fundamentally Speaking

Similar to what we did with corn in a recent post, the attached graphic is a matrix of what the 2020/21 U.S. soybean stocks-to-use ratio could be using various combinations of planted acreage in millions going across the x-axis at the top and yields in bushels per acre going down the y-axis on the left.

Our assumptions include an estimate of 20/21 beginning stocks at 480 million bushels (mb) which is the April 2020 WASDE ending stocks estimate.

Note that this year's ending stocks figure, which is next year's beginning stocks number, is likely to be larger as the current USDA export projection for this year at 1.775 billion bushels (bb) looks very high in light of limited Chinese purchases of U.S. soybeans in recent months.

We are estimating total 2020/21 consumption at 4.187 bb vs. the USDA projection given at their Feb 2020 Outlook Forum of 4.312 bb.

This is based on an export estimate for next year at 1.925 bb vs. the 2.050 bb USDA projected at their February Ag Outlook Forum.

Given overall lower global demand for vegetable oils and protein meals in the wake of the COVID-19, the fact that South America is wrapping up a record soybean harvest with both Brazil and Argentina having favorable currency rates relative to those in the U.S. and again a slow buying pace by China, we think when USDA releases their first take on the 2020/21 balance sheets for the major crops in next months' WASDE report, they too will lop their overseas sales figure.

Note that in the March prospective plantings report USDA said U.S. farmers intend to seed 83.5 million acres of soybeans this year, about 1.5 million less than the trade had anticipated.

University studies showing soybean returns losing less money on a net per acre basis vs. corn and the recent move in the SX2020/CZ2020 ratio to 2.55 suggests soybean planted acreage may exceed the intentions number.

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