Large Seed and Residual Use of Soybeans and Prospects for Year-Ending Stocks

Abstract

The USDA’s estimate of soybean stocks at the end of the third quarter of the 2014-15 marketing year (June 1, 2015) of 625.4 million bushels was surprisingly small and helped ignite fireworks in the soybean futures market. For example, the price of the August 2015 soybean futures contract shot up over 50 cents after release of the June 1 soybean stocks estimate on June 30. That estimate comes on the heels of smaller-than-expected stocks estimates at the end of the first quarter (December 1, 2014) and the second quarter (March 1, 2015) of the marketing year. The cumulative effect of the smaller than expected stock estimates is an unusually large estimate of seed and residual (unexplained) use of soybeans during the first three quarters of the 2014-15 marketing year. Specifically, we calculate seed and residual use through the first three quarters at 297.9 million bushels based on the estimated size of the 2014 harvest, estimated stocks at the beginning of the marketing year, imports during the first three quarters of the marketing year, and estimated domestic crush and exports during the first three quarters of the year. In this article, we address the potential implications of this large unexplained use of soybeans on the magnitude of stocks at the end of the marketing year. The magnitude of those stocks has no implications for the price of old crop soybeans. However, those stocks become part of the supply of soybeans for the 2015-16 marketing year and have potential implications for the price of new crop soybeans. We analyzed the relationship between soybean endings stocks and price in a farmdoc daily article (May 14, 2015) earlier this year.