 "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 said.
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
said.
"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.
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Good continued by saying that beyond the current marketing year,
the soybean market also anticipates a rebound in U.S. production in
2013.
"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
said.
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
Sciences]
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