 The November CME Group futures peaked at $14.65 a bushel on the last
day of August. The same contract traded more than two dollars lower
on Sept. 26.The sharp decline, thinks University of Illinois
agricultural economist Darrel Good, reflects the continuation of
poor economic performance and concerns about financial conditions in
Europe and the United States. He says the financial problems raise
serious concerns about commodity demand. However, the 15 percent
decline in soybean prices over the last four weeks may be too much.
The price decline appears particularly large when compared with
losses of 8-10 percent in livestock and livestock product prices
from the highs made earlier this year.
"One might expect that demand concerns would result in larger
price declines in the livestock sector than in the crop sector. It
may have been that crop prices were pushed too high in August on the
basis of crop concerns," Good said.
Whether or not soybean prices have moved too low should be known
very soon. USDA will release a stocks report this week (Sept. 30)
and a crop production update in mid- October. The last estimate of
soybean stocks projected a 225-million-bushel supply on hand at the
end of the fiscal year. The fourth-quarter stocks report sometimes
deviates from the projections. Still, the Illinois economist says it
would take a large deviation to substantially alter the supply
outlook for the current year.
The bigger supply question is the size of the 2011 soybean crop.
The next forecast will be released Oct. 12. USDA's September average
national yield forecast was 41.8 bushels to the acre, 0.4 bushel
above the September forecast.
From 1975 through 2010, the September yield forecast exceeded the
August forecast 17 times, as it did this year. In 10 of those 17
years, the U.S. average yield forecast in October exceeded the
September forecast. The increase ranged from 0.1 bushels to 2.3
bushels. In eight of those 10 years, the January yield estimate
exceeded the October forecast.
"There is some tendency, then, for a yield increase in September
to be followed by further increases," Good said. He tempers that
thought with the yet-to-be-determined impact of the mid-September
frost and freeze in the northern Midwest.
The other factor driving supply is acreage.
The uncertainty on this point rests with the Farm Service Agency
estimate of planted acreage for those producers participating in
federal programs. That FSA estimate is 1.375 million acres less (1.8
percent) than the current National Agricultural Statistics Service
estimate of planted acreage. It compares with a difference of 1.086
million (1.4 percent) in 2010 and 1.045 million (1.3 percent) in
2009. The larger difference suggests the NASS October estimate of
planted acreage could be reduced by 340,000 to 350,000 acres.
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The USDA stocks and crop production forecasts will set the supply
stage for the coming fiscal year. The trade will then turn to the
pace of soybean consumption.
Weekly USDA data will provide a steady flow of export
information, but the monthly Census Bureau domestic soybean crush
estimate along with estimates of soybean meal and oil production and
stocks will be missing. These reports were terminated in a
budget-cutting exercise.
The National Oilseed Processors Association provides an alternate
monthly estimate for its membership.
Good noted that not all of the soybean crush capacity is
represented by members of that association. "The lack of monthly
information comes at a time of tight supplies when more information,
not less, is needed," he said.
The lacking Census Bureau data will result in more uncertainty
about the pace of consumption and will put more focus on USDA's
quarterly estimates of soybean stocks.
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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