Crop prices keep breaking records
Weather issues like flooding and tight supplies push prices up
By David Asbridge
Editor’s Note: Farmer-leader Jimmy Sneed’s Mississippi soybean field (pictured) was one of hundreds across the United States this year where flooding delayed spring planting.
Soybean prices have been in a relatively narrow trading range around $13.50 per bushel since hitting that figure back in January of this year. This is about $4 per bushel higher than a year ago; stocks have remained tight and weather in Argentina and the United States has been less than stellar over the past few months. Brazil had some dry weather early on, but it appears that their crop grew through that adversity and will likely hit a new record production level this year.
Due to the poor weather, U.S. soybean planting is well behind this year. Many areas, particularly the eastern Soybean Belt, have had too much rain, which has kept farmers out of the fields just as they were trying to get their soybeans planted. Many areas along the Mississippi and Missouri rivers are also flooded. It is still not too late to plant soybeans in those areas, but the yield clock is ticking and each day of delay will likely cut into final yields. However, this is not a sure thing.
The 2008 and 2009 seasons were similar to this year’s situation, with planting delayed and only reaching into the mid-60-percent-complete area during the first week or so of June. The summer weather, however, made a big difference in the yields, with the 2008 yield falling from the year before to 39.7 bushels per acre, while the 2009 yield hit a new record high of 44 bushels per acre. Meanwhile, in 2010, the early June planting was about 15 points higher than in 2009, but the yield fell off by about half a bushel from the record 2009 level. So late planting can be a problem, but is not necessarily one, at least as far as yield is concerned.
At this point in the season, it appears that soybean yield this year could potentially come close to last year’s yield despite the late planting and flooding. The U.S. Department of Agriculture (USDA) forecast yield would average 43.4 bushels per acre. This would mean production of 3.29 billion bushels based on the USDA Planting Intentions reported acreage of 76.6 million acres planted and 75.7 million acres harvested. This would be 1.3 percent less than the 2010 production and down 2.2 percent from the record set in 2009. It would, however, still be the third-largest U.S. soybean crop on record.
USDA expects demand to roughly equal the production level this year, leaving stocks relatively unchanged from the 2010 crop, although it is still below desired levels. Soybean crush is expected to increase slightly in 2011 to about 1.66 billion bushels. Although up from the 2010 crop, this will be almost a billion bushels below the peak of 1.75 billion bushels in 2009. That peak was caused by reduced crops in both Argentina and Brazil that year from a severe drought in some of the main soybean-producing areas. This gave U.S. farmers the opportunity to increase sales of soybean meal and soybean oil to international customers, as the South Americans backed out of the market due to low soybean supplies.
Exports for the 2011 soybean marketing year are expected to be slightly below 2010’s expected record of 1.54 billion bushels. As mentioned above, Brazil is having a relatively good year and will likely take some sales away from the United States due to their record crop. Their 2.74-billion-bushel crop is virtually in the bin now and has been cutting into U.S. sales for the past few weeks. The United States has exported about 1.37 billion bushels so far during the 2010 marketing year, but the pace of exports is slowing. This will probably continue through the 2011 year as well.
Due to South American competition, exports of U.S. soybean meal and soybean oil are also expected to fall during the 2011 marketing year. Domestic use, however, is expected to increase for both products. Soybean meal use at home is expected to increase to the highest point in the last four years as the domestic livestock industry continues to recover from their slump. Soybean oil domestic use is also expected to increase in 2011, mostly based on increasing usage for soybean oil in the biodiesel industry. With the blenders’ credit back in place, biodiesel producers are expected to use a record amount of soybean oil this coming year, reaching 3.5 billion pounds. This is not bad from an industry that was using less than half a billion pounds of soybean oil just seven years ago.
Due to lower production, but good demand, ending stocks from the 2011 crop are expected to continue to be relatively tight. They are now expected to increase to 190 million bushels, but this is still only 5.8 percent of usage and well below the “normal” level of about 8 percent, where the market is considered balanced. This, of course, does have implications for prices for the 2011 crop. The 2010 crop is expected to average $11.40 per bushel, a new record for soybeans. For the 2011 crop, prices are expected to be even higher, averaging $13 to $15 per bushel to the farmer. With 3.29 billion bushels produced, this would be a crop worth about $46 billion!
Check in next month to get a final tally on how many acres actually get planted in the United States as we review the USDA 2011 Acreage Report and see which state wins the acreage battle this year. And, as always, please feel free to leave comments in the section below. See you next month.
David Asbridge operates NPK Fertilizer Advisory Service, an independent consulting firm that covers the crop and fertilizer markets, both domestically and globally.
Crop prices keep breaking records
Weather issues like flooding and tight supplies push prices up
June 20, 2011
By David Asbridge
Editor’s Note: Farmer-leader Jimmy Sneed’s Mississippi soybean field (pictured) was one of hundreds across the United States this year where flooding delayed spring planting.
Soybean prices have been in a relatively narrow trading range around $13.50 per bushel since hitting that figure back in January of this year. This is about $4 per bushel higher than a year ago; stocks have remained tight and weather in Argentina and the United States has been less than stellar over the past few months. Brazil had some dry weather early on, but it appears that their crop grew through that adversity and will likely hit a new record production level this year.
The 2008 and 2009 seasons were similar to this year’s situation, with planting delayed and only reaching into the mid-60-percent-complete area during the first week or so of June. The summer weather, however, made a big difference in the yields, with the 2008 yield falling from the year before to 39.7 bushels per acre, while the 2009 yield hit a new record high of 44 bushels per acre. Meanwhile, in 2010, the early June planting was about 15 points higher than in 2009, but the yield fell off by about half a bushel from the record 2009 level. So late planting can be a problem, but is not necessarily one, at least as far as yield is concerned.
At this point in the season, it appears that soybean yield this year could potentially come close to last year’s yield despite the late planting and flooding. The U.S. Department of Agriculture (USDA) forecast yield would average 43.4 bushels per acre. This would mean production of 3.29 billion bushels based on the USDA Planting Intentions reported acreage of 76.6 million acres planted and 75.7 million acres harvested. This would be 1.3 percent less than the 2010 production and down 2.2 percent from the record set in 2009. It would, however, still be the third-largest U.S. soybean crop on record.
USDA expects demand to roughly equal the production level this year, leaving stocks relatively unchanged from the 2010 crop, although it is still below desired levels. Soybean crush is expected to increase slightly in 2011 to about 1.66 billion bushels. Although up from the 2010 crop, this will be almost a billion bushels below the peak of 1.75 billion bushels in 2009. That peak was caused by reduced crops in both Argentina and Brazil that year from a severe drought in some of the main soybean-producing areas. This gave U.S. farmers the opportunity to increase sales of soybean meal and soybean oil to international customers, as the South Americans backed out of the market due to low soybean supplies.
Exports for the 2011 soybean marketing year are expected to be slightly below 2010’s expected record of 1.54 billion bushels. As mentioned above, Brazil is having a relatively good year and will likely take some sales away from the United States due to their record crop. Their 2.74-billion-bushel crop is virtually in the bin now and has been cutting into U.S. sales for the past few weeks. The United States has exported about 1.37 billion bushels so far during the 2010 marketing year, but the pace of exports is slowing. This will probably continue through the 2011 year as well.
Due to South American competition, exports of U.S. soybean meal and soybean oil are also expected to fall during the 2011 marketing year. Domestic use, however, is expected to increase for both products. Soybean meal use at home is expected to increase to the highest point in the last four years as the domestic livestock industry continues to recover from their slump. Soybean oil domestic use is also expected to increase in 2011, mostly based on increasing usage for soybean oil in the biodiesel industry. With the blenders’ credit back in place, biodiesel producers are expected to use a record amount of soybean oil this coming year, reaching 3.5 billion pounds. This is not bad from an industry that was using less than half a billion pounds of soybean oil just seven years ago.
Due to lower production, but good demand, ending stocks from the 2011 crop are expected to continue to be relatively tight. They are now expected to increase to 190 million bushels, but this is still only 5.8 percent of usage and well below the “normal” level of about 8 percent, where the market is considered balanced. This, of course, does have implications for prices for the 2011 crop. The 2010 crop is expected to average $11.40 per bushel, a new record for soybeans. For the 2011 crop, prices are expected to be even higher, averaging $13 to $15 per bushel to the farmer. With 3.29 billion bushels produced, this would be a crop worth about $46 billion!
Check in next month to get a final tally on how many acres actually get planted in the United States as we review the USDA 2011 Acreage Report and see which state wins the acreage battle this year. And, as always, please feel free to leave comments in the section below. See you next month.
David Asbridge operates NPK Fertilizer Advisory Service, an independent consulting firm that covers the crop and fertilizer markets, both domestically and globally.