There are more unknowns than knowns in the soybean market this fall, the biggest of which is whether lows have been set, according to Darrel Good, Extension economist at the University of Illinois, speaking at the Ag Market Network's November teleconference.
Other unknowns include the size and health of next year's South American crop, the discovery of Asian soybean rust in several states, demand strength for soybean oil and whether or not China will be a large importer this year.
As for knowns, “we expect both soybean exports and domestic use to rebound sharply from last year, when use was restricted by the small crop,” Good said. “We are off to a good start, with export sales that support USDA projections. China is a good buyer at this point.”
In addition, October crush figures were higher than the market expected, according to Good, “which brought in some price support. We have good demand, but I think we're going to fall well short of using this big crop. We will see a dramatic increase in ending stocks.”
The newest unknown is the discovery of Asian soybean rust in the south Delta, and the impact that it might have next year on acreage and yield. “That's all yet to come.”
It adds up to a big mystery for soybean price prospects, according to Good. “We have come to expect that cash prices would bottom in September through November and so far that's been the case. We put in a low in the Midwest in the second week of October.
“However, that low was not as low as we might have expected. Compared to the low prices we saw in 1998-2001 — when supplies were not as burdensome as they are this year — this year's lows were about a dollar higher.
Good says that normally, with projected year-ending stocks of 460 million bushels — about 16 percent of use — “we would forecast a season average price in the low $4 range.”
“There is some head-scratching going on,” Good says. “We have a very bearish fundamental situation, but prices have not gone as low as we thought they would have. And now we've had about a 40-cent recovery in the cash price.”
Good believes much of the strength “comes from the oil side of the price. Soybean meal prices are consistent with the low prices we've seen in the past. However, oil prices are 50 percent higher than the oil prices during the period of low prices from 1998 to 2001. The bean market is being carried on the back of soybean oil.
“The question is whether or not that oil demand will continue to support soybean prices.”
This could be a year when normal seasonal price patterns go out the window, according to Good. “We could follow this post-harvest recovery with some additional weakness later in the marketing year, particularly if the South American crop unfolds in a good fashion.”