The soybean market remains in lockstep with the corn market, despite abundant supplies. At some point the market will determine enough acres of corn have been bought, and both corn and soybean prices could find themselves in mid-air, much like cartoon characters that’ve chased each other off a cliff. They’ll grin at each other, and suddenly they drop out of view. Continuing demand for corn to feed an increasing number of ethanol plans will provide a foundation for the corn market. But what about soybeans? That’s a different story.

2006 was a year of significant statistics for the US soybean industry:
• We produced a record 3.188 billion bushels
• Acreage was among the greatest at 75.5 million.
• Soybean yield of 42.7 was the second highest.
• Soybean exports for the year will be at record high levels of 1.120 billion bu.
• Aug. 2007 carryout will be the highest at 575 mil. bu.

Those statistics are from USDA’s latest Oilseeds Outlook, authored by Mark Ash and Erik Dohlman. They said the final USDA crop report two weeks ago on the 2006 soybean crop faded 16 million bushels from the November forecast, with most of the change due to lower yield estimates for Illinois and Missouri.” Nevertheless the crop was large helped by the unusually high 75.5 million acres harvested.

Export estimates were trimmed a bit by USDA to reflect a softer expectation for Chinese purchases of US beans. Current exports are a bit behind the record pace of 2005, but USDA says unshipped sales could catch up.

Soybean stocks at the last benchmark on December 1 were at record levels of nearly 2.7 billion bushels, compared to 2.5 billion in 2005. Stocks are not expected to drop below 575 million bushels by the end of the marketing year in August. Stocks have continued to ease upward with nearly every crop report.

The fall price rally slipped sideways in December as demand slowed and foreign production prospects picked up. At that time the average farm price was $6.14, with cash prices in the mid-$6 range achievable for many producers, however many beans had been sold for lesser amounts, “By the end of 2006, approximately half of the crop was marketed at a price averaging close to $5.70 per bushel.” Currently the forecast range in beans prices is $5.75 to $6.45 per bushel.

Chinese stir fry may be popular with your family, but not as much as in China, which has doubled its purchases of soybean oil. About a quarter of soybean oil exports will be unloaded this year in Chinese ports. Most US oil will be shipped to Latin American buyers. Domestic demand is dominated by biodiesel producers, but as oil prices rise, their interest has waned. SBO prices have risen 3 cents since last summer making biodiesel about 22 cents per gallon more expensive. That cost, combined with lower oil prices for petroleum, has been shrinking profits for biodiesel producers. The balance of the demand for soybean oil has also softened due to food makers substituting for other oils to avoid the trans-fat issue present with hydrogenated soybean oil.

With soybeans being crushed for their oil, soybean meal becomes a co-product, but it has nearby appeal in Canada and Mexico. USDA says exports sales are health, demand is up 24%, and nearly 75% of bean meal is being consumed by Canada, Mexico, and Latin America.

Regarding other oilseeds:
• The 7% reduction from the 2005 cottonseed crop was derived from an 8% decline in 2006 harvested cotton area.
• US sunflower seed production was nearly halved in 2006 from the preceding year’s bumper crop, due to a 28% drop in acres and a 21% drop in yield.
• The US canola crop is down 12%, with the help of an 8% percent cut in acreage.
• Canola exports are rapidly expanding, primarily to Europe where is it used in biodiesel.
• Peanut production was down 29% from 2005.

Globally:
• Rain has helped the Argentine soybean crop.
• India is cutting its oilseed acreage by 7% to produce feed grains.

Summary:
A record US soybean crop in 2006 has been shrinking because of healthy export business and a strong demand for soybean oil from biodiesel refiners. Despite a record carryover, the average price is above $6 per bushel. Competing oilseed crops were hurt by low yields and acreage in 2006. Acreage for soybeans in 2007 is undecided but will be reduced by corn acres.