Years of Record Soybean Production Compounding Global Glut

For the fourth consecutive year global soybean farmers are compounding a global glut that has doubled since 2009, producing more soybeans than the world needs.

As corn prices have fallen by 34% over the past year and farmers shift to soybean production, Brazil and Argentina will be completing their third consecutive record harvests while the U.S, the world’s largest producer and exporter will be completing the planting of its largest area under cultivation on record next month.

Less than three years after a U.S. drought pushed up prices, soybean production has skyrocketed to outpace global demand. Before the 2016 harvest, world inventories are forecast to increase 5.8% to 95 million tons, and U.S. inventories are expected to climb to 446 million bushels – up from an estimated 362 million bushels as of August 31, according to a Bloomberg survey of analysts.

Global demand however, has been reaching records for the past seven consecutive years. U.S. soybean exports for delivery September 1 have climbed 11% and U.S. soymeal exports have jumped 13% from the same point last year – both record increases, according to the U.S. Department of Agriculture (USDA).

Increased demand from China and a reluctance on the part of U.S. growers to sell have driven soybeans to outperform both corn and wheat this year. U.S. farmers, as of March 1, hold inventories of 609 million bushels – 60% higher than March 1, 2014 and the highest level since 2010, according to the USDA.

There may be market signals, however, that global buyers are looking to South America for cheaper supplies. U.S. soybean sales as of April 30 for delivery after September 1 are 4.324 million tons - a year on year decrease of 44% and the lowest level since 2010, according to the USDA. Total soybean production this season in South America is forecast to be 166.4 million tons – up 7.4% from last year and a 44% increase over 2011/2012. And depending upon late-season weather, this estimate may be increased to 170 million tons.

Another factor hampering U.S. soybean sales is the strengthening of the dollar. Since September 1 the dollar has risen 25% against the Brazilian real, and 6.2% against the Argentine peso, making U.S. soybeans comparatively more expensive on global markets.