Crystal ball gazing: Soybeans

Did you increase your bean acres after the March 30 USDA planting intentions report? A significant swing in market prices has benefitted soybean production.  Fundamentals include the South American shift to corn and fewer bean acres, China’s aggressive buying of soybeans, and fewer US bean acres for 2012.  Ag economists report there was a $48 advantage for corn on March 1 which has evolved into a $78 advantage for beans on May 10.  Most farmers were planting corn for the revenue opportunities, but what is the market opportunity for soybeans?

The La Nina impact on South America reduced the global supply of soybeans by reducing yields in a year that many Brazilian and Argentine farmers shift away from soybeans to more corn acres.  However the recent USDA World Supply-Demand report indicated a larger US soybean crop would make up part of the shortfall.  Following that report, the USDA’s Oilseeds Outlook report indicated that despite a 3.2 billion bushel crop, the carryover would be historically tight and still nearly half of the crop would be exported.  Looking toward the South American production season beginning in six months, USDA expects production to increase 15% to 271.4 mmt. USDA says there are brighter prospects for South American expansion.

Domestically, soybean production is expected to produce a 43.9 bushel average yield on 73 million acres, lower than many years because of the larger 2012 crop acreage for corn.  In 2011 the crop was trimmed to 41.5 bushels from the hot dry weather of La Nina.  Even with the lesser acreage, the higher yield would make the 3.205 billion bushel crop the third largest.  Good planting weather in the US has allowed soybeans to be planted much earlier than usual, and so far twice as many soybeans have been planted compared to the normal amount.

With an early maturing crop, which had the potential for satisfying immediate needs, there may be an early boom in export sales.  However, with higher prices, diminishing domestic stocks, and an expected large South American crop, the pace of US exports could decline early in 2013.  USDA says a competitive export market will draw soybeans away from crushers, which are expected to use 1.655 billion bushels, 150 million more than the export demand.  At the end of the marketing year in August of 2013, USDA is forecasting only 145 million bushels, a 4.4% stocks to use ratio, well under the 5% traditional floor.  That is one of the reasons for the expected season average price range of $12 to $14.  Markets will be sensitive to any weather threat against the good production scenario, as well as any other supply or demand disruption which may occur.
Currently, new crop soybeans are above the $13 mark for November and January delivery, but quickly erode to the $12.80 to $12.60 range for the period when South American soybeans should be available.

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