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USDA lowers 2024/25 soybean production forecast

Meanwhile, U.S. canola production hits record highs, driven by rising biofuel demand, while global palm oil supplies tighten.

Soy Beans On Plant

The U.S. Department of Agriculture (USDA) has revised its soybean production forecast for the 2024/25 marketing year (MY), adjusting output downward by 4 million bushels to 4.6 billion bushels. This reduction stems from a marginal decline in yield expectations, now projected at 53.1 bushels per acre, down 0.1 bushels from the September forecast. Despite the slight reduction, the yield remains up by 2.5 bushels from the previous year, driven by higher yields in states like Illinois, Iowa, and Missouri, which offset reductions in states such as Indiana, Ohio, and Wisconsin.

Harvested acreage for soybeans remains unchanged at 86.3 million acres, but total supply is forecast to drop by 2 million bushels due to the combination of reduced production and slightly lower beginning stocks. Despite this decline, U.S. soybean ending stocks for 2024/25 are projected to hold steady at 550 million bushels, thanks to balanced demand. Soybean crush and export forecasts remain unchanged, while the season-average soybean price continues to be $10.80 per bushel, providing some stability to the market amidst uncertainties in production.

One notable trend in the soybean sector is the steady pace of the harvest. As of early October, 47% of the U.S. soybean crop had been harvested, surpassing the five-year average of 34% for this period. Despite ongoing harvest progress, the USDA reported a slight dip in crop conditions, with 63% of the crop rated as good-to-excellent, though this still reflects an improvement compared to the same period last year.

US canola production hits record levels

A significant development in the oilseed sector is the forecasted record-high U.S. canola production for MY 2024/25, which is expected to reach 4.9 billion pounds, up nearly 20% from the previous year. This surge is attributed to higher harvested acreage—now at 2.7 million acres—and improved yields, which stand at 1,811 pounds per acre, up 18 pounds from last year. Increased production, particularly in North Dakota, Montana, and Minnesota, has positioned the U.S. canola industry to meet rising demand for canola oil, driven by its critical role in biofuel production.

The USDA noted that canola oil use in biofuel reached record levels, with 546 million pounds of canola oil being utilized in biomass-based diesel production in July 2024 alone. This trend is expected to continue, as biofuel use drives up demand for canola oil. Consequently, canola imports are forecast to reach a record-high 8.1 billion pounds to meet growing biofuel demand, with canola oil ending stocks projected at 165 million pounds, maintaining strong supply levels.

Global palm oil supply tightens amid Indonesian production drop

On the global stage, the USDA's forecast for palm oil production in MY 2024/25 took a hit, driven largely by a reduction in Indonesian output. The world’s leading palm oil producer saw its forecast lowered by 0.5 million metric tons, bringing its production down to 46.5 million metric tons. This adjustment is a reflection of lower yields, projected at 3.32 tons per hectare, down 1% from last month’s estimate.

Indonesia’s decline in palm oil production is partly offset by higher production in Thailand, but the overall global supply has tightened, prompting a reduction in the global palm oil export forecast to 48 million metric tons. This decrease in supply has pushed palm oil prices to new highs, with Malaysia’s Free on Board (FOB) prices hitting $1,070 per metric ton in October—an $82 increase from September. Palm oil prices are now significantly higher than soybean oil prices, which are at $1,003 per metric ton (FOB, Argentina). Historically, palm oil has been priced lower than soybean oil, but the ongoing supply issues have reversed this trend.

The ripple effects of higher palm oil prices are expected to dampen global consumption, with demand from major buyers such as China, India, and Pakistan decreasing. The USDA forecasts a 0.6 million metric ton reduction in global palm oil consumption, with the global ending stocks also down to 16.1 million metric tons, marking a 1.5 million metric ton reduction from last month’s forecast.

Sunflowerseed and peanut production struggles continue

Meanwhile, the USDA also forecast a sharp decline in U.S. sunflowerseed production for MY 2024/25, expected to drop to 1.3 billion pounds, marking a 42% decrease from last year and the lowest output since 1976/77. This slump is attributed to a significant reduction in harvested area, which fell to 691,000 acres. While yields are at a record high of 1,889 pounds per acre, they are not enough to offset the decline in acreage. As a result, sunflowerseed crush and exports are forecast to fall, with ending stocks expected to be 210 million pounds, the lowest since 2019/20.

In the peanut sector, production is projected at 6.4 billion pounds, down from last month’s forecast due to lower yields caused by heavy rains from Hurricane Helene in major producing states like Alabama, Georgia, and Florida. Peanut exports are also forecast to decrease, as Argentina’s peanut production rebounded from last year’s drought, increasing global competition.

Outlook for 2024/25

Overall, the global oilseed market is facing tightening supplies, particularly in palm oil and sunflowerseed, while the U.S. soybean market remains relatively stable despite a small production cut. Higher biofuel demand is driving up canola oil production and imports, while U.S. farmers face challenges in peanut and sunflowerseed crops due to weather disruptions.

As production levels and supply chains remain strained in key markets, price pressures are expected to persist, impacting both domestic and international trade dynamics. The USDA’s October report underscores the need for farmers, producers, and global markets to remain adaptable in the face of these evolving supply constraints.

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