While soybean prices have been following the corn market in recent years, they now seem ready to strike out on their own. “Soybean prices have been following the corn market the last three years but are now poised to separate from corn,” says Todd Davis, senior economist with the American Farm Bureau Federation.
“As corn stocks are projected to increase, the corn price will have limited upside potential as the market has to clear. Soybeans are projected to continue to have tight stocks, which will keep prices high enough to ration use throughout another marketing-year.”
Soybean stocks, he says, are projected to increase by only 25 million bushels over the 2012-13 marketing year. Looked at another way, 150 million bushels in stocks equates to about 17 days of soybeans in the grain bins on Sept. 1, 2014.
“Even so, the projected marketing-year average price for soybeans is expected to decline from $14.40 per bushel for 2012-13 to $12.50 per bushel for 2013-14, although this estimate is up slightly from previous estimates.”
Soybean prices will be less connected to corn this year, says Davis. Market dynamics are changing compared to what farmers have seen over the last three years or so.”
Brazil pushing U.S. as top producer
For a long time, the United States was the biggest kid on the block when it came to producing and exporting soybeans. But now we’ve got company, says Brian Williams, Mississippi State University Extension economist.
“Brazil is giving us a run for our money. This last year, we edged them out in production but just barely. If things go according to plan for Brazil next year, they’ll actually top us in production. They did top us this past year in exports, and they’re expected to do the same next year,” says Williams.
Meanwhile, China — which imported 69 million metric tons of soybeans in 2012 – imported an additional 10 million metric tons this past year.
“Brazil is limited somewhat by its infrastructure,” says Williams. “When they were bringing in a record crop in 2012, there was a bottleneck, and they weren’t able to export as much as they wanted. Ships were lining up at the ports and sometimes waiting weeks and months. Some of them get tired of waiting and moved on up to New Orleans, where they knew they can get loaded faster. So that’s working in our favor — we have the infrastructure to export large quantities while Brazil is still struggling in that area.”
As for the U.S. crop this past year, uncertainty continues over exactly how large it will be, says Williams.
“We had an unusually cool, wet spring, and a lot of producers weren’t able to get all of their crop in, at least on time, and some of them didn’t get it in at all. There’s a potential for our acres to be quite a bit lower than what some reports are indicating,” he says.
Drier weather creeping into the Corn Belt in late summer and early fall of 2013 could have an impact on soybeans, says Williams.
“If it is dry, then it makes harvest easier and quicker. But with the late planting in 2013, it was of a bit more concern because some of that crop wasn’t fully developed yet.
“So, the question is whether or not these late-season dry conditions will have an effect on this past year’s soybean yields. We were also seeing some drought creep into parts of Louisiana, Arkansas and Mississippi, but that was helped by timely rainfall.”
The U.S. seasonal outlook for soybeans was improved for 2013 over 2012, says Williams.
“Things look much better than in 2012, and hopefully that’ll be reflected in our final soybean yields. The 2012 crop was not a good one in terms of yield, but the vast majority of the Corn Belt is looking as if their yields will be better this year. Even the low 40s is not bad in terms of soybean yields, especially considering what they could be, and if you look at some of our yields in the Southeast.
“Iowa actually has a lower projected yield this past year than in 2012, and they were expected to be the No. 2 soybean-producing state. If the second-largest producing state is estimated to have lower yields than last year, that’s a little concerning.”
In the Southeast, only two states – Kentucky and Tennessee — were expected to have better yields this past year than in 2012.
“But those two states also were hit harder by the drought than other Southeastern states in 2012. Even though the Southeast doesn’t have higher projected yields overall for 2013, we set the bar high in 2012. A lot of states, including Mississippi, had record-high soybean yields in 2012.
If we look at acres and yields, that translates into production. We’re expecting higher production in 2013 than in 2012 because of low overall yields two years ago and an improvement in yields this past year.”
Turning to soybean disappearance, Williams says the two primary uses are soybean crush — to make meal and oil – and exports.
“Exports for this marketing year are looking good. They’re trending higher. Crush is down but not a lot. I don’t see demand dropping too much because of the decrease in crush. Demand is still there.
“All livestock numbers are supposed to be up, and a lot of the feed sources for those animals include soybeans. Whenever you have more animals, you’ve got to feed those animals. That will help to maintain soybean demand.”
Even though production is looking better for 2012, the U.S. is not a lot higher on ending stocks, he says.
The national average soybean price last year was $14.75 to $15 per bushel, notes Williams. “We’re not quite at that level this year, but we’re still holding strong in the soybean market, and it’s highly dependent on ending stocks. That’s the big question going forward.”
In 2012, soybean futures were $17 per bushel, and that was during a drought, he says. “And then when harvest started coming in, it didn’t look quite as bad, and futures started to come down.
“Then, this past spring, we had too much moisture and couldn’t get our crop in the field. That caused prices to go up, though not as much as last year. Then, as the summer began, it became apparent that growers were getting the crop in at a record pace, so prices came back down. But during some of the Midwest crop tours, they started talking about low pod counts, and that brought prices back up.”
There’s a large variety of prices in the Southeast, and the basis seems dependant on the ability to get the crop moved out, he says. “In Louisiana, they’re pushing a basis of 90 cents to $1, but that’s a port price, near New Orleans.”
The general observation for soybean production in 2013 was that a cool, wet spring delayed planting, says Williams.
Soybean crop conditions were looking fairly good across the Southeast, he says, with about 60 percent of the region’s crop rated good to excellent.
Moving forward, Brazil and Argentina will remain the biggest competitors to the U.S., says Williams.
“We need to keep our finger on the pulse of Brazil because ultimately they’re our biggest competition on the global market. As for the U.S. crop, we don’t know yet if the initial low pod counts will translate into low yields. It didn’t look so good at this time in 2012, but once the combines started to roll, it was much better than expected.”
The U.S. has the infrastructure to get its crop out and to deliver exports, he says. “Even though we’re more expensive than Brazil, it gives us an edge with those customers who don’t want to wait.”
Looking ahead to this year’s soybean acreage, Williams says corn prices haven’t been holding their own as well as soybean prices, and that’ll be a factor, particularly if ending stocks end up lower than expected.
“Soybeans will be a stronger competitor for acreage this year. So at this point, I think we’ll see an uptick in soybean acres for this year to offset some of the lower production in 2013. Price depends on the final yield and acres.”