farmgate: Soybeans? Oh, I'd Forgotten All About The Soybean Market!
Earlier this year the market wanted more soybeans produced in 2008, and farmers responded with their intentions to increase soybean acres significantly. The bottom dropped out of the soybean market, farmers shifted some acres back to corn, and both crops continue their fight for acres. The May USDA Supply/Demand report indicated tight supplies when the 2008/09 marketing year comes to an end, but let’s look at the bigger picture.
Barely 10% of the 2008 soybean crop has been planted, But USDA forecasts a 3.105 bil. bu. crop with the help of a trendline yield. In the latest Oil Crops Outlook published by the Economic Research Service, the new crop will be 520 mil. bu. larger than the old crop, but demand will be strong, and the 145 million carryout expected in August of 2008 will grow only to 185 mil. bu. by August of 2009. Pushing and pulling on the number will be a slight increase in the crush and a slight decrease in soybean exports. But the tight ending stocks will be the prime support for soybean prices to range from $10.50 to $12.00 during the marketing year starting in September.
Producing 3.1 bil. bu. is predicated on soybean growers following through with their reported intentions to plant 74.8 million acres of soybeans, which is an 11 million acre increase from last year. USDA is projecting a 42.1 bu. national average yield to reach the 3.1 bil. bu. expected crop.
There will be plenty demand to consume that supply, and USDA expects competition from the Brazilian crop a year from now to compete with the new US crop. Global supplies are still expected to be tight for the coming year and that will keep exports at high levels, which are expected to again exceed 1 bil. bu. Additionally, the continued weakness in the value of the dollar will make US soybeans seem like a bargain to international buyers.
The expected 40 million bushel drop in exports will be partly offset by a 10 mil. bu. increase in the crush. USDA economists think the crush would be even larger, but high soybean prices will dampen demand for oil and meal. The contraction in the livestock herd because of high feed prices will soften demand for soybean meal. Meal consumption will be essentially flat and meal exports will be down slightly. Global soybean meal use would be down even more, but the high cost of corn makes the protein value of soybean meal attractive at current prices.
In the oil market, the high cost will also dampen demand, and the marginal increase in use is attributed to the bio-diesel production industry. Competition from other vegetable oils is expected to continue diminishing the demand for soybean oil. Strong export demand for soybean oil is attributed to the value of the dollar, and exports should slip only from 2.85 to 2.65 bil. pounds. Subsequently, soybean oil stocks will tighten from 2.8 to 2.7 bil. pounds. Prices should remain in the low 50 cent per pound range, where they have been for the past year.
Globally, soybean production is expected to reach record levels in Paraguay and Uruguay, but the large Argentine crop remains in the bin as the government and farmers disagree over how much exports are taxed. European consumption is expected to remain steady, as demand for bio-diesel has stagnated.
Summary:
Although a significant increase is expected both in acres and production, US soybeans will demand a high price this year because of continued tight carryover supplies. Farmgate prices that could average well over $10 per bushel will help dampen some of the demand for domestically produced meal and oil. However, exports of soybeans, soy meal, and soyoil are expected to remain healthy because of the exchange rate.
Posted by Stu Ellis on May 13, 2008 12:05 AM to farmgate