Soybeans: More Acres, But Some Price Recovery Expected!

December-12-08

Much like corn, soybeans have recently rallied off of what most producers hope is the bottom for prices, at least for a while. March soybean futures reached a low of $7.80 on December 12, and then recovered 76 cents per bushel in the following week.

USDA made a few changes to usage, but no change in the final ending stocks of 205 million bushels for the 2008/09 marketing year. Exports were increased by 30 million bushels, but domestic crush was reduced by the same 30 million bushels keeping ending stocks unchanged.

USDA is now estimating that exports will be down by 9% compared to last year, and so far export commitments are down only 4%. Export commitments of both China and Japan (our two largest customers) are about 4% greater than at this time last year. Expected production in Brazil was also dropped by 37 million bushels. The combination of Brazil and Argentina’s production is expected to be up only 2% this winter.

Anticipated increases in soybean acreage in the U.S. for 2009 will likely be a negative factor for soybean prices this winter. Concerns that fertilizer companies will be slow to lower fertilizer prices will stimulate a shift to soybean acres. Informa has estimated that soybean acres would be up by nearly 6 million acres. This level would be bearish for cash prices which might move below $7.00 during the 2009 harvest if such large acreage were to be planted. However, my anticipation is that perhaps only two million more acres of beans will be planted and that corn acres will not be down as much as is now anticipated.

The global financial crisis will continue to weigh on soybean prices as well. Little good news is expected on that front through the winter as continuing signs of slowing economic activity and rising unemployment will tend to cause consumers and businesses are very cautious in their purchases.

This may mean that soybeans futures may trade in a range bounded by roughly $8 and $9 per bushel this winter. Many producers would feel encouraged to have the opportunity to price beans back toward the $9 level. Some weather concerns in South America may provide that opportunity this winter. But major increases in soybean prices should not be anticipated unless weather becomes a factor, or the world economy recovers more quickly than is now expected.


Use of This Information: This information is based upon current evaluations by USDA and Purdue analysts. While it utilizes the latest known information, future outcomes can be much different due to shortcomings in analytic methods, to inaccurate anticipation of future events, and to unforeseeable new events. Ultimate outcomes are often different than provided in the outlook. Thus, this information should be used in conjunction with other outlook sources and decision makers should always evaluate how a range of potential outcomes would impact their firm or organization.

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Chris Hurt
December-12-08
Purdue University