Wheat and corn prices are high, in part from domestic and foreign demand, as well as low global stocks. On the other hand, soybean prices are high, in part from domestic and foreign demand, but global stocks are not low. Could that impact your marketing plan for soybeans? By the way, what is the big picture for soybeans and oilseeds? We’re glad you asked!

US soybean stocks will be so low at the end of the current marketing year, USDA is forecasting the season average price to be a dime less than a $10-$11 range. The lack of sufficient supplies is only a year removed from record high surpluses, but reduced acres and a mediocre sized crop have occurred in the meantime. However the Brazilian crop estimates are being trimmed ahead of the coming harvest. That is giving rise to strong soybean prices reflected in USDA’s latest Oil Crops Outlook.

The 2007 US soybean crop was the smallest in 4 years, thanks to less acreage and less yield. Since the crop size was determined, prices have been very strong, and have not deterred importers. Shipments are down only slightly despite the lower supply. But those export shipments are fading as reflected in the reduced demand for soybeans at the Gulf and the correspondingly weaker Gulf basis, replaced by a stronger domestic crush. The export trade for the current marketing year is estimated at just under one billion bushels, but would be an 11% decline from last year’s export business.

Crushers are extracting more oil from soybeans, and USDA has raised its projection by 90 million pounds for the marketing year. Carryover stocks are forecast at 2.25 billion pounds, but the demand for oil has taken prices to record high levels. Oil prices recently surpassed 54¢ per pound for the September 2008 contract. The high oil demand and low soybean stocks have pushed futures prices past the $13 mark for the July contract. But the cash market has been slower to move and the basis is about $1, which is two to four times normal levels. Soybean meal prices are also at record highs, causing USDA to forecast a seasonal price range of $305 to $335, compared to the $205 average for last year.

Soybean oil prices are carrying the prices of competing crops higher as well:
1) Sunflowers. Higher yields, more acres, but the cash price for sunflower seed is at a record level of $21.50 per CWT. That results from a high demand for sunflower seed oil, which is selling for twice the price of soy oil.
2) Canola. More acres, but lower yields limited much increase in production. Cash prices have reached an unprecedented $24 per CWT, helped by higher soy oil prices.
3) Peanuts. Higher yield on more acres, but supplies are down because of reduced carry-in. A decrease in beginning stocks, has kept supplies down.
4) Flaxseed. Production was down 46% in 2007 from the prior year due to a 56% cut in acreage. Yields were below the 10-year average and prices are at record highs.
5) Cottonseed. Lower cotton yields and cottonseed availability have contributed to lower supplies of oil and support crush margins.

Globally, soybean production in Brazil has not expanded as much as once thought, but with reasonable weather and crop development yields will be nominal. A lower than expected crop will mean lower than expected exports and declining ending stocks. But Argentine soybean exports may take up the slack at the risk of leaving that nation with low supplies. European imports of soybean will allow crushers to provide soybean oil for bio-diesel and soybean meal for livestock feed that will take the place of wheat. China is on pace to set a record high level of soybean oil imports, but oil consumption rates have slowed from last year.

Summary:
The short crop and high demand for soybeans in the US have resulted in short supplies until next fall, pushing prices higher and pulling other vegetable oils higher. However, expectations for a large, but not record crop, in Brazil and exportable supplies of Argentine soybeans have promised to fill world demand. China will demand large supplies, as will Europe, but the Europeans will make efficient use of both oil and meal.