The soybean industry enjoyed another record year in 2015 as farmers harvested a projected U.S. yield of 48.3 bushels per acre, an all-time high. Although there was a slight reduction in harvested acres, 2015 had the largest annual production and total supply of U.S. soybeans in history.
Imports, exports, and total use were down slightly from 2014 record levels, and ending stocks as a percentage of total use is at its highest level since 2006. Producing record yields and total production in back-to-back years is not without consequences. These factors have helped to reduce the average soybean price to its lowest level since 2009, an estimated $8.90 per bushel.
Decreasing farm revenue will weigh heavily on farmers’ decisions in 2016. The USDA reports that net farm income in 2013 was $123.7 billion. In 2014 that number fell to $91.1 billion and for 2015 is projected to be $58.3 billion.
The University of Illinois provides soybean budgets that detail costs and revenues for the upcoming year. The 2016 budgets for highly productive Illinois cropland estimate that corn after soybeans will return $256 per acre. Likewise, soybeans after corn is projected to return $195 per acre.
AN EDGE FOR CORN
Unlike last year, it appears that corn has an edge in profitability compared to soybeans on highly productive acres. When budgeting for average-to-low productivity farmland, the advantage diminishes and the two crops will be fairly competitive for acres.
These operator and land return figures do not include land costs, such as cash rent. Lower revenues will encourage producers to revisit crop budgets in an attempt to reduce their costs of production.
One area that receives a lot of attention is the cost of cash rent. Higher commodity prices in previous years, such as $14.40 per bushel soybeans in 2012, caused cash rents to be bid higher. Decreasing land values into 2016 will also be of concern to producers.
Cropland values in 2015 decreased in 9 states, with Iowa losing over 6 percent. The effect to farmers is likely yet to be realized, but concerns about the impact to a producer’s borrowing base and cost of land should be considered.
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World soybean production is expected to increase by 2.34 million metric tons from year-ago levels. Major importers, including China, the European Union, Japan, Mexico, and Southeast Asia, are projected to increase imports by 2.5 million metric tons over last year. The majority of that increase will be to China, as they are expected to increase imports by 2.15 million metric tons. The major importers are also expected to decrease ending stocks by 1.47 million metric tons.
INCREASE IN EXPORTS
The major exporters, including Argentina, Brazil, Paraguay, and Uruguay, are projected to increase their production slightly by 0.7 million metric tons. The increase will come from Brazil as Argentina is expected to produce fewer soybeans than they did last year. In addition, the major exporters are projected to increase exports by 6.29 million metric tons.
World domestic crush is projected to increase by 11.86 million metric tons, helping to offset higher production. If the U.S. fails to produce a record yield in 2016 and plants roughly the same acres, there will be a slight reduction in total supply. However, without a major decrease in production from the major exporting countries, including the U.S., soybean prices will remain under pressure.