 "That perceived need has provided underlying support to soybean
prices," said Darrel Good. "Some analysts have already projected
a large increase in U.S. soybean acreage in 2008. However,
forecasts of the acreage response in the United States before
the outcome of the 2008 South American crop is clearer cannot be
very accurate."While some production decisions have already
been made, producers clearly demonstrated the ability for
late-season acreage flexibility in 2007, when planted acreage of
soybeans was nearly 3.5 million less than intentions reported in
March. There does appear to be a bit of a knee-jerk reaction by
producers to plan for more soybean acreage in 2008 with November
2008 futures above $9.50. However, December corn futures at
$4.25 suggest that corn is still potentially more profitable
than soybeans in much of the Midwest."
Good's comments came as he reviewed soybean prices, which
moved to the highest level for the current marketing year on the
last day of October. November 2007 futures traded to $10.185.
November futures have reached a high over $10 only once before,
when the 1988 contract traded to a high of $10.46.
The average spot cash price of soybeans in central Illinois
reached a high of $9.73 on Oct. 31, well below the recent high
of $10.40 established on March 22, 2004. Basis levels continue
to strengthen, although basis remains generally weak by historic
standards.
"The Illinois River basis strengthened by 43 cents from Oct.
15 through Nov. 2, while the average central Illinois basis
strengthened by only 20 cents," said Good. "The average cash
price in central Illinois on Nov. 2 was 35.75 cents under
November futures, compared to the average for the previous four
years of 19 cents.
"Future basis strengthening is likely as the marketing year
progresses," he said.
The 60-cent rally in soybean futures over the past three
weeks has been led by soybean oil prices, he noted. After
dipping to about 38 cents in early October, December soybean oil
futures moved above 42 cents in early November. December soybean
meal futures have been trading between $270 and $280 per ton.
"The recent strength in soybean oil prices has been
associated with large export sales and rising crude oil prices,"
said Good. "For the current marketing year, which started on
Oct. 1, the USDA has forecast a 24 percent decline in U.S.
soybean oil exports, to a total of 1.45 billion pounds.
"As of Oct. 25, U.S. export commitments were reported at 304
million pounds, 22 percent larger than commitments of a year
earlier."
[to top of second column]
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Higher crude oil prices have supported soybean oil prices, due to
the expected increase in biodiesel production stimulated by high
fuel prices. The Census Bureau has been reporting the amount of fats
and oils used in biodiesel production only since January 2006. For
the first year, only once-refined soybean oil used in biodiesel
production was reported.
"Since January 2007, both refined and crude soybean oil have been
reported, as well as the amount of all fats and oils used in
biodiesel production," said Good. "It appears that the use of fats
and oils for biodiesel production peaks in August.
"In August 2007, 376.2 million pounds of soybean oil were used
for biodiesel production, accounting for 20.6 percent of the monthly
use of U.S. soybean oil. That use declined by nearly 26 percent in
September, compared to a 16 percent drop in September 2006. High
soybean oil prices are keeping biodiesel production margins thin
even with higher fuel prices."
Relatively strong export sales of U.S. soybeans have also
provided some support for soybean prices. For the year, the USDA
projects a 13 percent decline in U.S. soybean exports. Export
inspections during the first nine weeks of the marketing year were
about 23 percent less than the total of a year ago.
"However, unshipped sales as of Oct. 25 were about 3 percent
larger than sales of a year ago, so that total commitments are only
about 9 percent behind those of a year ago," said Good. "A strong
export sales pace combined with a 3.6 percent year-over-year
increase in the domestic crush in September suggest that soybean
demand remains very strong."
Good said that in the short run the USDA's November soybean
production forecast, to be released on Nov. 9, could have some
influence on price direction. Expectations are for a slightly larger
forecast than the October forecast of 2.598 billion bushels.
"Soybeans that were stored and hedged or priced with a
hedged-to-arrive contract have earned good storage returns in the
form of basis appreciation," he noted. "Further basis strengthening
is anticipated.
"The outcome for soybeans stored unpriced is more mixed,
depending on when the crop was harvested. A move to new highs offers
an opportunity to sell a few of those unpriced soybeans, but plenty
of price volatility is expected over the next several months."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences] |
