Last week, Doane Advisory Services analyzed several approaches for calculating the trend yield for corn. The trend yield for soybeans can have at least as big an impact on the outlook for the soybean sector. For 2014, USDA's trend yield for soybeans is a full bushel per acre higher than the one we use. With harvested acreage of between 80.5 million and 81 million acres, the deviation in production is huge, especially for a market where ending stocks have averaged about 160 million bushels over the last five years.
The data for soybeans indicates that yield growth is slowing. Using data for the 1980 through 2013 period, adjusting for years of extreme weather, the trend yield increases at a pace of 0.466 bushels per acre per year. In contrast, the trend based on data for 2000 through 2013 – excluding 2012 – shows an annual increase of 0.366 bushels per acre per year. Using a significant historical time period, e.g. 1980 through 2013 or 1990 through 2013 the trend yield for 2014 comes close to USDA's current forecast of 45.2 bushels per acre. However, if the pace of yield growth is slowing, as indicated using data for 1995 through 2013 or 2000 through 2013, the trend yield for 2014 is just slightly above 44 bushels per acre for this year.
If soybean acreage over the next few years is close to 80 million acres, and harvested acreage is close to 79 million acres, the differences in trend yields have a significant impact on overall soybean production over the next five years. The cumulative difference over the 2014 through 2018 period is nearly 500 million bushels. The implication is that demand has to be a lot stronger under the high yield scenario or we could see a huge increase in ending stocks and much lower soybean prices.
So, how does the yield trend in the U.S. compared to those for countries in South America? To provide some insight into the answer for this question we used data for the 1995 through 2013 period to estimate trends. For consistency we excluded data for the years where the actual yield was different from the trend by at least one standard error. That approach at least partially takes out the influence of the extreme years – both very favorable and unfavorable growing seasons. The results of these efforts are provided in the table – along with the yields implied by USDA in the May World Agricultural Supply and Demand Estimates (WASDE). It is interesting to note that there is essentially no upward trend to yields in Paraguay. The average yield in Paraguay during the 5 years from 1995 through 1999 is actually higher than the average for the last five years from 2009 through 2013.
The data shows that soybean acreage is trending up in all of the key South American growing regions. Soybean acreage in all of South America is put at more than 137 million acres in 2013/14, with acreage in Brazil at 73.9 million acres and Argentina at 49.4 million. The data shows Brazil's acreage rising at about 2 million acres per year and acreage in Argentina increases at a rate of 1.4 million acres annually. The trend increase in Brazil is larger than the 1.5 million acre trend increase in soybean acreage in the world - excluding South America.