"The generally sideways pattern for soybean prices over the past
month reflects conflicting fundamental factors," Good said. "The
most supportive factor has clearly been the very strong export
pace. U.S. exports will be restricted to some extent this year
due to the smaller supply. The USDA forecast exports at 1.05
billion bushels in September, when the crop was expected to
total only 2.634 billion bushels. The export forecast was raised
to 1.265 billion bushels last month when the production forecast
was increased to 2.86 billion bushels. The latest forecast is 95
million bushels less than last year’s exports and 236 million
less than were exported during the 2010-11 marketing year," he
Through the first nine weeks of the current marketing
year, the USDA reported cumulative export inspections of 370
million bushels, about 110 million bushels larger than
cumulative inspections last year, according to Good. Exports to
China accounted for about half of the year-over-year increase.
Good said that as of Oct. 25, the USDA reported unshipped
export sales of 650 million bushels, 166 million bushels larger
than unshipped sales a year earlier. Nearly 70 percent of the
increase was to "unknown" destinations, much of which may be
additional Chinese purchases. The large U.S. soybean export
program to date reflects the continued growth in Chinese
consumption and the unusually small soybean harvest in South
America earlier this year.
"While the robust export pace has been the most supportive
fundamental factor, the domestic crush during September was also
a bit larger than expected," Good said. "The National Oilseed
Processors Association reported that its members crushed 119.732
million bushels of soybeans during the month, 9.419 million more
than the unusually small crush in September 2011. For the year,
the USDA has forecast the crush to be 163 million bushels less
than crushed last year. Like exports, the domestic crush this
year will be limited by a smaller supply," he said.
Based on the October production forecast, the current pace of
consumption of U.S. soybeans clearly cannot be maintained, Good
"Prices have not increased in an attempt to slow the pace of
consumption for at least two reasons. First, the market
anticipates that the U.S. harvest was actually larger than the
October forecast. If so, a higher rate of consumption can be
supported. The USDA will release a new production forecast on
Nov. 9 and a final estimate on Jan. 11, 2013. Second, the market
anticipates a rebound in South American soybean production in
2013 that will provide ample supplies to support the increased
pace of world consumption and to provide for exports of soybeans
and soybean products to the United States if needed. The USDA
currently forecasts 2013 South American production at a record
5.449 billion bushels, 1.212 billion larger than the 2012
harvest. That forecast will be updated monthly beginning on Nov.
9. The larger production expectation is reflected by the lower
price of soybean futures for the last half of the 2012-13 U.S.
marketing year," Good said.
[to top of second column]
Good continued by saying that beyond the current marketing year, the
soybean market also anticipates a rebound in U.S. production in
"If acreage is maintained at the 2012 level and the U.S. average
yield rebounds to a trend value near 43.8 bushels, the 2013 crop
would be near 3.34 billion bushels, 478 million larger than the
current forecast of the 2012 crop. This expectation is reflected by
the much lower futures price for the 2013-14 marketing year," he
Good said that deferred soybean futures prices are lower than
nearby prices in anticipation of larger South American and U.S.
crops in 2013, but it should be noted that those prices are still
higher than the average prices received for the 2010 and 2011 crops.
"That is, there is some production risk reflected in the current
price structure so that if current expectations materialize, even
lower prices should be expected," Good said. "The immediate focus is
on South American weather and production prospects there. For the
month of October, much of the central and western portions of the
production area in Brazil received less-than-average precipitation,
while much of Argentina was extremely wet. Not much can be said
about 2013 U.S. production prospects at this point. While drought
conditions have been alleviated in much of the eastern producing
areas, dryness persists in portions of the western Corn Belt and
much of the central Plains," he said.
"With current unsettled weather conditions and large crops needed
in both South America and the U.S. in 2013, the soybean market may
be understating production risk. If so, modestly higher prices for
the 2013 crop would be expected," he said.
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental