Weather, supply/demand and economy factor into soybean market

By ANDREA JOHNSON, Assistant Editor
Wednesday, June 3, 2009 12:47 PM CDT

The soybean market has experienced another remarkable climb in prices, with cash prices moving up $4 per bushel to over $11 per bushel in half a year.

The primary reason for the run-up in price is a smaller-than-expected soybean crop in South America.

The reports of drought during the 2008-2009 growing season were inconsistent, and that apparently caught traders off guard. Reports also suggested that the smaller soybean crop in Argentina and Brazil had already been figured into the market.

Yet, the South American soybean crop has gotten even smaller, and that's taken prices higher.

“The problems with the South American crop really snuck up on us. All of a sudden, we're short on soybeans,” said Darrel Good, University of Illinois Extension grain marketing economist.

On May 29, the CME Group reported the July future closed at $11.84 per bushel, August closed at $11.48, September at $10.96 1/2, November at $10.62 1/2, January at $10.65 and March at $10.54 per bushel.

Compared with prices in mid-May, the July future was 54 cents higher, August was 63 cents higher, September was 74 cents higher, and November and January 2010 were 87 cents higher.

According to the CME Group website, soybean markets moved higher on May 29 based also on a lower dollar index, higher crude oil prices and higher palm oil prices.

The USDA reported, on May 28, weekly export sales were 237,500 metric tons (8.7 million bushels) for the 2008 soybean crop, and 227,000 metric tons (8.3 million bushels) for the 2009 crop. Soybean and soybean oil exports numbers were below trade expectations.

As of May 21, cumulative soybean sales for the 2008 crop were at 100 percent of the USDA forecast vs. a five-year average of 95.4 percent.

Meal export sales were 6 percent above the five-year average, while oil sales were 12 percent below the five-year average.

At one elevator in west central Minnesota followed in this column, soybeans on May 29 were $11.77 with a basis of 45 cents under.

“On old crop, my thought is just look at the next four or five weeks, and meter out any old crop inventory (for marketing),” Good said. “I think trying to outguess the market in that short of time is pretty hard.”

Good encourages producers to keep an eye on general economy pressures, including any indications of rapid inflation.

“Rapid inflation time periods put upward pressure on commodities in general,” he said.

The trade will take note of prevented planting acres and growing conditions for soybeans. A weather market could continue in soybeans throughout June, July and August, depending on rainy or drought conditions.

As of May 29, Good said the soybeans had just emerged across Illinois. The corn averaged about 6 inches tall. He added that 2009 is the second latest planting season in Illinois in recent history.

“The northern part of Illinois has more early planted corn. Southern Illinois has very little corn planted,” he said. “In southern Illinois, we hear that some farmers are considering taking prevented planting and coming back in the fall with winter wheat. Others are not going for prevented planting, and will plant early season soybeans.”

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