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"Current prices are likely reflecting uncertainty about a number
of factors," said Darrel Good. "Those uncertainties may include
the South American growing season -- weather and soybean rust --
and renewed concerns about soybean rust in the United States in
2006. "Soybean rust was recently confirmed in eastern Texas,
raising the risk of more widespread rust in 2006, depending on
the extent to which it overwinters."
Good's comments came as he reviewed the soybean market. As
generally expected, the USDA on Nov. 10 released a larger
forecast of the size of the 2005 U.S. soybean crop. The forecast
of 3.043 billion bushels, reflecting a record-large average
yield, was a little larger than expected.
The U.S. average yield forecast of 42.7 bushels is 1.1
bushels above the October forecast and 0.5 bushels above the
previous record yield of 2004. The yield is about 1.9 bushels
higher than projected by the crop condition ratings at the end
of the year. The Illinois average yield of 46 bushels is two
bushels higher than projected by a yield model based on trend
and summer weather conditions. The Iowa average yield of 53
bushels is five bushels higher than projected by that model.
At the same time as the USDA increased the forecast size of
the 2005 harvest, it reduced the forecast of 2005-06
marketing-year consumption by 13 million bushels. The USDA
projects marketing-year U.S. exports at 1.075 billion bushels --
40 million below the October projection and 28 million below the
record exports of a year ago.
"The month-over-month decline in the export projection
reflects the slow start to the 2005-06 marketing-year U.S.
export program, as pointed out two weeks ago," said Good. "In
addition, the USDA increased the projection of Brazilian exports
during the period from October 2005 through September 2006 by 40
million bushels. The increase came despite a 55-million-bushel
reduction in the projected size of the 2006 harvest, reflecting
a further reduction in expected planted acreage."
The 2006 South American soybean crop is now projected at 3.9
billion bushels -- 55 million smaller than the October forecast
but 370 million larger than the 2005 forecast.
Good said that the domestic crush of soybeans during the
current marketing year is projected by USDA at 1.72 billion
bushels -- 25 million above the October projection and 24
million above the crush during the 2004-05 marketing year.
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"The month-over-month increase in the crush projection was driven by
larger projections of soybean meal consumption," he said. "Meal
exports are projected at 6.7 million tons -- 150,000 larger than the
October projection but 600,000 below the exports of last year.
"The increase from October reflects expectations of slightly
larger world trade of soybean meal. While it is early in the 2005-06
marketing year, which started on Oct. 1, the combined pace of U.S.
soybean meal exports and export sales is currently running about 22
percent behind the pace of a year ago."
Good added that domestic meal consumption during the current
marketing year is projected at 34.3 million tons -- 300,000 above
the October forecast and 700,000 tons above the domestic use of last
year. The expected 2.1 percent year-over-year increase in meal
consumption is in contrast to a 5.5 percent expected decline in feed
and residual use of grain and comes in the face of an expected 19
percent increase in the availability of dried distiller grain.
"The projections of meal consumption and the domestic soybean
crush appear a little aggressive, although the September 2005 crush
of 133.2 million bushels is consistent with the projection for the
year," said Good. "Still, year-ending stocks of U.S. soybeans are
now projected at 350 million bushels, slightly above the recent high
on Sept. 1, 1999, and the largest since Sept. 1, 1987.
"The projected ending-stocks-to-use ratio is 11.85 percent, the
highest since 1998-99."
Soybean prices moved higher on Nov. 11, with cash prices
approaching the pre-harvest levels as the basis continued to
strengthen in many markets. The average overnight cash bid in
central Illinois on Nov. 11 was $5.75 -- 60 cents above the low
reached on Oct. 10. Based on the U.S. average farm price received in
September and October and using closing futures prices on Nov. 11 to
project the average cash price for the remainder of the year, the
market is currently reflecting a 2005-06 marketing-year average farm
price of about $5.80.
"That price is 6 cents above the average price received in
2004-05, when year-ending stocks were about 100 million bushels less
than projected for this year," said Good. "The USDA projects the
marketing-year average price in a range of $4.95 to $5.75, and our
composite model correlating the year-ending stocks-to-use ratio to
price projects a marketing-year average near $5.25."
[University
of Illinois College of Agricultural, Consumer and Environmental
Sciences news release]
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