Soybean futures prices continue to trade at historically high price levels thanks to continued tight supplies in the United States and strong demand. While the outlook for prices is likely to remain firm at these higher levels for the short term due to tight ending stocks, there is some question as to whether soybean futures prices will remain higher for the latter part of 2023.
Right now the supply side of the equation is uncertain for the 2023-24 crop year due to the reality of how many acres will be planted to soybeans this spring, and what Mother Nature has in store for us this summer. But, we can start to piece together the demand component for the upcoming crop year. And it still is a friendly story.
The January 2023 U.S. Department of Agriculture report said that for the 2022-23 crop year, there were 4.276 billion bushels of soybeans grown in this country. On the demand side, essentially half of the soybeans we grow are exported, and the other half are used for soybean crush. (Specifically, 1.99 billion bushels are slated for export demand while 2.245 billion bushels are to be used for crush.)
U.S. soybean export demand
U.S. export demand for soybeans has been relatively decent. Cumulative export inspections (soybeans that have actually left the country) year-to-date are at 34,100,498 metric tons, which is 61.3% of the USDA’s forecast for the 2022-23 marketing year versus the five-year average of 57.7%. In other words, we are on target to meet the USDA’s projected goal. In the year ahead, demand for U.S. soybeans may stay around 2 billion bushels.
While Brazil undoubtedly exports more soybeans than the U.S. and will continue to be competition for us, China currently uses nearly 10 million metric tons of soybeans per month, (or 367.4 million bushels per month) and requires imports from both the Southern and Northern hemispheres year-round to meet its demand.
U.S. soybean crush demand
The U.S. soybean crush demand has been fantastic, with demand for renewable diesel expected to grow by leaps and bounds. According to the American Soybean Association in November of 2022, “It is estimated that there are 60 soy crush plants currently operating in the United States. These 60 plants can use around 2.2 billion bushels per year … To date, there have been announcements for 23 plant expansions, which would add about 750 million bushels per year in crush capacity … Of the 23 crush plant announcements, 13 are for new plants and 10 are for expansion of current plants, at least two of which have been completed.”
Wow! The U.S. currently has 60 soybean crush facilities that are using approximately 2.2 billion bushels of soybeans annually. I looked back at USDA reports since May 2022 when USDA first reported on production and demand estimates for the 2022-23 crop year, just to understand how current crush demand ebbs and flows monthly.
After all, we have been hearing about this increased crush demand coming in the future, so I wanted a baseline to see how the USDA has been reporting crush demand so far. Here are the results:
• December 2022 USDA report – 2,245 million bushels of soybeans used for crush;
• November 2022 USDA report – 2,245 million bushels of soybeans used for crush;
• October 2022 USDA report – 2,235 million bushels of soybeans used for crush;
• September 2022 USDA report – 2,225 million bushels of soybeans used for crush;
• August 2022 USDA report – 2,245 million bushels of soybeans used for crush;
• July 2022 USDA report – 2,245 million bushels of soybeans used for crush;
• June 2022 USDA report – 2,255 million bushels of soybeans used for crush; and
• May 2022 USDA report – 2,255 million bushels of soybeans used for crush.
Overall, the average for the past eight months for soybeans used for crushing for the 2022-23 crop year is 2.243 billion bushels. That meets the demand for current needs.
Now what about future crush demand?
The 23 plant expansions, which would add about 750 million bushels per year in crush capacity, are expected to be completed between now and 2025. Now, here is some very simple math. To gain an additional 750 million bushels of soybean production, American farmers would have to plant an additional 14 million acres of soybeans, assuming 53.5 bushels per acre nationwide yield. According to the most recent USDA report, farmers planted 87.5 million acres of soybeans in the spring of 2022, with yield estimated at 49.5 bushels per acre.
Eye-popping and jaw-dropping for sure. The reality is that by 2025, soybeans used for the crush will be close to 3 billion bushels. That also means that by 2025, U.S. soybean acres would need to be close to 101 million planted acres to account for the combined demand for crush and exports. (This is, of course, assuming export demand remains near 2 billion bushels annually. U.S. export demand will likely change in the coming years as South American production continues to increase and will be competing with the U.S.)
Keep in mind, the USDA will not add all of that demand at once into the upcoming 2023-24 balance sheet scheduled to come out this May. However, USDA may take note at their annual Outlook Forum in Washington D.C., on Feb. 23 to 24.
The USDA has a tendency to take baby steps in updating demand or production numbers, and my guess is that its estimators will be slow to increase demand for crush. Likely, for each production year between now and 2025, the USDA will slowly add approximately 200 million bushels of demand annually for crush. After all, it takes time to build a plant, and there is always the risk that a plant actually does not come to fruition and that those additional acres may not be needed.
Regardless, the soybean demand story for American farmers looks to be friendly for the long term. Keep in mind, just because the demand story is friendly, does not mean that soybean prices need to stay at higher lofty price levels. There will be price peaks and valleys in the future, as there have been in the past.
Editor’s note: Naomi Blohm is a marketing advisor with Total Farm Marketing by Stewart-Marketing and she is a regular contributor to the Iowa PBS series “Market to Market.” She can be reached at [email protected].
