The national average soybean yield in 2005 is projected at 39.9 bushels per acre, based on long-term state yield trends and the intended acreage for each. Combined with an expected U.S. harvested area of 72.9 million acres, the yield would produce 2,895 million bushels of soybeans.

A modest 2 percent increase in U.S. soybean exports to 1,125 million bushels from this season’s record is anticipated, as shipments during the first half of 2005/06 could stay brisk. Domestic processors are believed capable of expanding the soybean crush by 2 percent in 2005/06 to 1,690 million bushels. The improvement in demand and reduction of output is seen paring back season-ending soybean stocks next year to 290 million bushels.

The U.S. Department of Agriculture projects the 2005/06 national average farm price for soybeans at $4.70- $5.70 per bushel.

Harvest losses caused the 2004/05 forecast of Brazil soybean production to be lowered again last month to 53.0 million metric tons from 54.0 million previously. A slash in yields also cut estimated soybean output in Paraguay (the world’s fourth-largest soybean-exporting country) from 4.5 million to 3.8 million tons.

Domestic outlook

Mostly optimal weather during April has advanced crop planting very well this spring. U.S. farmers intend to sow 73.9 million acres of soybeans in 2005, the majority of which will be planted once they finish with their grain and cotton crops.

As of May 8, producers had sown 26 percent of intended soybean acreage. Although planting progress for soybeans is not quite as advanced as a year ago, it is up slightly from the 5-year average of 23 percent. Only in Minnesota have there been moderate delays because of soil conditions that had not warmed up quite enough.

The national average soybean yield in 2005 is projected at 39.9 bushels per acre, based on long-term state yield trends and the intended acreage for each. The forecast also assumes that most farmers have not materially altered their usual production practices for the risk of Asian soybean rust and that they will be able to detect episodes and effectively manage them with fungicide applications. Sentinel plots have been planted throughout the country to provide an early warning system to soybean producers.

So far this year, soybean rust has been confirmed in only four counties in Florida and one other in Georgia, but could spread more widely by next summer if conditions allow. These assumptions imply that the potential impact of the disease on soybeans would be greater on its production costs than for its yields. Thus, a trend yield on an expected U.S. harvested area of 72.9 million acres would produce 2,895 million bushels of soybeans.

While 2005 production would be down 246 million bushels from the previous year, the total supply would be nearly the same because of a large increase in beginning stocks, as opposed to the very low 112 million bushels that were carried over to start 2004/05.

There will not be as dramatic an improvement in 2005/06 soybean demand as there has been in 2004/05, yet the outlook next season still appears relatively favorable for U.S. interests.

World supplies

World oilseed supplies are projected up 3 percent in 2005/06 to 435.6 million metric tons. Foreign supplies are expected to account for all of that 13-million-ton increase. In particular, production from Brazil may comprise most of that expansion, although the timing for the majority of those oilseed supplies will not be available until the last half of the marketing year.

Gains in U.S. oilseed output represented about 45 percent of the global increase in 2004/05, but production this year is anticipated to decline. Even so, this reduction should be cushioned by comparatively large carryover stocks, resulting in only a 0.3 percent reduction in the total domestic supply.

A modest 2 percent increase in U.S. soybean exports to 1,125 million bushels from this season’s record is anticipated, as shipments during the first half of 2005/06 could stay brisk.

Domestic processors are believed capable of expanding the soybean crush by 2 percent in 2005/06 to 1,690 million bushels. The improvement in demand and reduction of output is seen paring back season-ending soybean stocks next year to 290 million bushels.

Despite the odds that the majority of producers in most years will maintain the upper hand over soybean rust, the market also recognizes there is an uncertain possibility that its damage could escalate if weather or local shortages of fungicide prevent timely treatment.

As in any year when there is a potential for drought, this new risk element builds in another premium into market prices during the summer. It is available to encourage producers to plant more soybean acres, increase crop insurance coverage, protect them with fungicides in the event of soybean rust, and commit to some forward sales.

The added price premium will be present until crops are safely harvested in the fall. So, if trend yields are achieved, new-crop prices (the current range for November 2005 futures is $6.25-$6.30 per bushel) could drop considerably.

The same kind of price premium emerges prior to the South American harvests, which failed to disappear this season when there were poor yields in Brazil for the second consecutive year.

Using these outlooks for demand and normal yields (domestic and foreign), USDA projects the 2005/06 national average farm price for soybeans at $4.70-$5.70 per bushel.

Stable, but moderate, growth in soybean meal demand is likely next year. The outlook for domestic feed disappearance in 2005/06 is viewed increasing by 1.6 percent to 34.0 million short tons. A modest expansion of export demand (to 6.4 million tons) is also anticipated.

Higher U.S. meal exports are consistent with an incremental growth in world consumption, a competitive value for the dollar, and a comparatively tight soybean stock carryover in Brazil that is expected next October.

Soybean meal prices may stay within $150-$180 per short ton, a range not dramatically lower than current season values.