Decline in U.S. soybean acres expected to continue for years

Like many analysts, those at the U.S. Department of Agriculture are predicting a steep drop in U.S. soybean acres next spring.

Unlike many analysts, they are not forecasting a rebound in those acres in the years that follow.

In its base line projections used for budgeting purposes, the USDA is forecasting 82.5 million acres of soybeans in 2019, down 6.6 million acres from 2018.

That is very much in line with the five to seven million acre decline that many market analysts are forecasting.

However, while others think it will be a temporary adjustment until the trade spat with China boils over, the USDA believes acres will not fully recover over the next decade.

It sees steady but small increases most years, climbing part way back to 85.5 million acres by 2028. That is a far cry from its February estimate, calling for 91.5 million acres by 2027.

There wasn’t much text to accompany the charts, so the reasoning behind the numbers is left open to interpretation.

“What it is saying to me is that the analysts at the USDA don’t think that there’s going to be a rapid recovery in the U.S. export market for soybeans in China,” said Bruce Burnett, director of markets and weather with Glacier’s MarketsFarm.

He noted that the U.S. had already been steadily losing market share in China to South American soybeans long before the trade spat.

“This long-term shift to South American supplies, it’s almost like it has been accelerated by the tariff war,” said Burnett.

He sees merit in the USDA forecast because the Chinese government has a long memory and likely won’t buy U.S. soybeans to the same degree it did in the past, even if the trade war subsides.

Another potential market factor is that the Chinese government recently lowered the minimum requirement for soybean meal in hog rations.

One of the people forecasting a big drop in U.S. soybean acres next year is Soren Schroder, chief executive officer of Bunge, the world’s largest oilseed processor.

He told investment analysts on a recent conference call to expect a big swing out of soybeans and into corn.

“Prices would suggest a significant shift to corn, whether that’s five or 10 million acres, I don’t know,” he said.

“But it’s probably a shift of some kind of historic magnitude that we’ll be seeing when we get there.”

The high end of his estimate would be an 11 percent decline in soybean plantings.

Schroder said a significant increase in U.S. soybean ending stocks is “almost unavoidable” due to the ongoing trade spat between the U.S. and China.

“Even if a trade resolution was had soon, we would still have a significant build-up in soybean ending stocks,” he said.

However, Schroder said that despite the current disruptions to the soybean market, the long-term prognosis for the industry remains good.

Global soybean meal demand is growing by five to six million tonnes a year. Annual crush capacity is growing at a slower pace.

He believes crush margins are going to remain at levels that will encourage capacity expansion over the next few years.

“The underlying fundamentals in crush are still very much there,” said Schroder.

Burnett said the fallout of shrinking U.S. soybean acres will vary for Canadian crops.

It will likely lead to strong demand for Canadian soybeans, leading to a premium over soybeans grown in Montana and the Dakotas.

The better alignment of supply and demand will also likely boost U.S. soybean prices, which will in turn elevate canola prices.

However, the USDA is forecasting that the lost soybean acres will go to corn and wheat, and that will pressure Canadian wheat and feedgrain prices next year, he said.

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