"For the past four months, March 2013 futures have traded
between about $13.50 and $15 and are currently near the midpoint
of that range," Good said. "Prices have received underlying
support from the rapid pace of exports and domestic crush but
have experienced wide swings based on changing expectations for
the size of the South American crop. During the same time
period, November 2013 futures traded between about $12.60 and
$13.60 and are currently at the bottom of that trading range.
"Recent price weakness in both old- and new-crop futures
reflects current expectations that the 2013 South American crop
will be record-large and will increasingly replace U.S. soybeans
in the world market. While the pace of U.S. soybean exports
remained large through the second week of February, recently
announced cancellations of some export sales support the
expectation of a rapid decline in that pace in coming weeks,"
Similarly, the pace of the domestic crush remained large
through January, supported by large exports of both oil and
meal, Good said. The January crush as estimated by the National
Oilseed Processors Association on Feb.15 was not quite as large
as expected, and the pace is expected to slow as South American
products become available.
Good reported that the 2012-13 marketing year is just
approaching the halfway point, so there is still uncertainty
about how the tight supplies of U.S. soybeans will be allocated.
Prices will remain sensitive to the revealed pace of consumption
and South American production prospects. If the South American
crop is as large as advertised, a slower pace of consumption of
U.S. soybeans along with potential to import soybean products
later in the year may mean that higher prices will not be
required to ration remaining supplies.
"Beyond the next two months, prospects for the 2013 U.S. crop
will become an increasingly important price factor," Good said.
"Production prospects will begin with the USDA’s March 28
Prospective Plantings report. Expectations about planted acreage
will likely be in a wide range, but it seems reasonable to
expect acreage near that of last year. A return to near-trend
yields then, would result in a larger crop and lower prices.
"We have suggested that prices would return to the
pre-drought levels, around $11. That is consistent with the
recent projections by both the Congressional Budget Office and
the USDA. It now appears that the cash price implied by the
projected price for crop revenue insurance, the average of
November 2013 closing futures prices during February, will be
well above $11. The average futures price during the first 11
days of the averaging period was $13.01, and the average for the
month would be $12.85 if the price for the rest of the month
remained at the same level as on Feb.15," Good said.
[to top of second column]
One factor that could provide additional support for soybean prices
during the 2013-14 marketing year would be a rapid expansion in
Good said that the EPA has announced a minimum of 1.28 billion
gallons of biodiesel to be produced in 2013, up from 1 billion
gallons in 2012. Annual increases in the total advanced biofuels
mandate of the Renewable Fuels Standards (which can be met with
biodiesel) in combination with the reinstatement of the
$1-per-gallon biodiesel tax credit for 2013 could propel biodiesel
production well above the minimum, particularly in 2014, if the tax
credit is extended.
In recent periods, vegetable oil has accounted for about
three-quarters of the feedstock for biodiesel production, and
soybean oil has accounted for about three-quarters of the vegetable
oil feedstocks. As biodiesel production expands, limited supplies of
alternative feedstocks would likely increase the proportion of
vegetable oils used, particularly soybean oil.
"An increase in vegetable oil demand for biodiesel production
could support soybean oil and soybean prices during the 2013-14
marketing year at higher levels than are now anticipated," Good
said. "Such an outcome could result in a very interesting dynamic in
future years. Higher soybean oil and soybean prices relative to
other crop prices in 2014 would be expected to stimulate more
soybean production if biodiesel demand was expected to remain
strong. This would be in contrast to the ethanol-driven increase in
corn acreage since 2007. The increase in soybean production and
processing in order to meet expanding soybean oil demand could then
result in a surplus of soybean meal and lower prices for that
product, with an indeterminate effect on soybean prices beyond
2014," he said.
Good concluded by saying that there is considerable uncertainty
about U.S. biodiesel production beyond 2013 because production is
primarily policy-driven. "That is another factor that can be added
to the long list of factors that will impact soybean prices over the
next 18 months," he said.
[Text from file received from the
University of Illinois College of Agricultural, Consumer and