Four Industry Experts Provide Insight into Markets, the Soybean Oil Industry, the South American Soybean Industry and Social Media
Market Production Analysis and Market Outlook
David Asbridge

A new soybean marketing year started on September 1, 2009.  The 2009/10 crop year is likely to be another year of records or near records, following a two-year period filled with records.  The spring started off slowly as rain in the eastern Midwest kept many farmers out of the fields, causing the crop in those areas to be planted up to two weeks later than normal.  Other areas also had stress, but the states of Illinois, Indiana and Ohio took most of the brunt of trying to get the crop planted between the relentless showers of early spring.  Despite these setbacks, however, U.S. farmers planted a record level of soybeans, hitting a high of 77.7 million acres, a full 2.0 million acres above the record set during the 2008 crop year. 

After the crop was finally planted, many areas had record cool temperatures for much of the summer.  Many states, again centered in the eastern Midwest, had the coolest July in recorded history.  This cool weather, coupled with the late planting, tended to keep the crop from catching up in terms of maturity.  Many of the traditional guidelines such as blooming and pod set, have been well behind normal.  For instance, the July 5 USDA report showed that only 14% of the soybean crop had bloomed compared to the 5-year average of 24%.  By the first week in August, only 36% of the crop had set pods compared to the average of 54% for that date.

Weather this summer, however, has proven to be relatively good for the crop.  Despite cool temperatures, the crop’s maturity has begun to catch up.  Pod setting on September 6 had reached 97%, only 2 points behind the average.  And, perhaps the most relative point, USDA has recently increased its yield estimate to 42.3 bushels per acre, the third highest yield in U.S. history.  Combined with the record area planted, this would be a new record production of 3.25 billion bushels, eclipsing the previous record set back in 2006.

Record production is happening at a good time.  The ending stocks from the 2008 crop had fallen to only 110 million bushels, the lowest level in decades, following record consumption during the 2008 crop year.  Record exports, mostly due to increased buying from China, helped overcome lower domestic use.  Chinese buying of U.S. soybeans was stimulated by the lack of soybeans available from both Brazil and Argentina due to extremely dry weather in both countries.  Exports are expected to continue to be very strong until next March or April when the new crop becomes available in South America.

Prices have also been included in the records set over the past couple of years.  The highest season-average price ever received by U.S. farmers was set for the 2007/08 crop with a record $10.10 per bushel.  The highest futures price for soybeans was set back in June 2008 at a peak of over $16 per bushel.  And now, despite futures prices falling below $8 per bushel in December 2008, the 2008/09 average cash price is expected to average $10.00 per bushel.  Prices for the 2009 crop are not expected to be quite that high, but should still average well above the $9 per bushel mark.

Despite the rosy scenario for this year, there is still one factor lurking in the background which could hurt U.S. soybean production this year.  If we get an early frost, some of the later planted beans could be harmed.  This could hurt both the quality of the beans and possibly the quantity as well.  There are currently no consensus forecasts for an early frost, but the possibility is still there.  If we were to have an early frost in some of the high-production areas of the Midwest, prices could jump back to near record levels again, but at this point, it does not look too likely.

Overall, the outlook is for higher production and lower prices this year, but what does that mean for the 2010 crop year?  Follow my column each month as we explore that question.  Please feel free to leave comments or questions below.


posted by Expert 11:55 am