"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," Good
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
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 biodiesel production.
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