How sweet is: At the 1994 Mid-South Farm & Gin Show, Riceland Foods Chief Executive Officer Richard Bell said potential existed in the future for producers to see $9 soybeans.
And now, almost 10 years later, it happened.
“When the price hit $9 recently, I started getting a lot of telephone calls and e-mails,” he laughed at this year's show at Memphis. “My prediction finally made it — it just took a while.”
But $9-plus soybeans are just part of what has been a remarkable year, says Bell, who's headed the 8,000 member Stuttgart, Ark., farmer-owned cooperative for the past 27 years.
“What a difference a year has made. At last year's show, I had to work hard to be halfway optimistic about the outlook for soybeans and grains. But since that time, we've seen a fundamental change in the marketplace that has had a significant impact on demand and price.”
At the end of the year, he says, there was a 58-day supply of world grains, compared to a 111-day supply a year earlier. Ending wheat supply was 78 days, rice 73 days, and corn 38 days. “The pipeline supply is generally about six weeks, so we very well could see corn below the pipeline level.” Carryover levels of wheat and corn are the lowest in many years, he noted.
“We saw stagnant production in many parts of the world, rising world consumption, and increasing world trade, which is an important aspect of price-making.”
Amazingly, Bell says, “We harvested a 10 billion-bushel corn crop last fall, and we're going to sell it all, thanks to strong domestic growth, including 1 billion bushels for ethanol — which could expand to 2 billion — and strong world demand. The U.S. produces 40 percent of the world's corn supply, which gives us an absolute advantage in that crop.”
He expects another 10 billion-bushel crop this year, with continued strong demand, and prices in the $2.35-$2.45 range. “Before summer, I believe we could see $3 per bushel for Chicago December corn. And although Mid-South producers tend to not sell what they've not planted, they need to take advantage of these pricing opportunities as they come along.”
The current winter wheat crop will be smaller than expected, Bell says. “People just didn't plant as much as we'd thought.”
Wheat nonetheless tends to be a good crop for the Mid-South growers, he says, due largely to newer, better varieties. “I used to grit my teeth over the low test weights, but we don't see much of that any more.”
The North American Free Trade Agreement (NAFTA) has been a boon to grain sales, he contends. “We're shipping trains to Mexico every other week. We've also been able to cultivate business in Egypt and China.”
Bell says, however, he's not as enthusiastic about the Central American Free Trade Arrangement and tends to be “a bit irritated” with the Bush administration's approach. “It's not really a free trade agreement; it's more a series of bilateral agreements, and it comes up quite a bit short in terms of trade benefits.”
As for those $9 soybean prices, Bell's advice: “I tell growers, enjoy! It's a 50-year phenomenon — we had a great crop in the South when the Midwest had a poor crop. It was a great crop from a quality standpoint, too; I've never seen such high quality soybeans. And also unusual, at harvest time, soybean prices were rising.”
The U.S. crop came in at only 2.4 billion bushels, down 12 percent from the year before, with an average yield of 33 bushels, down 16 percent from 2001. Carryover was below 200 million bushels. All of which, Bell says, served to ration supply and drive up price.
China and its huge population will continue to be a major influence on the world soybean market, he says. “But I think a lot of people misread the reason for China's influence on demand, and that's the 300 million to 400 million people with higher incomes, who are shifting to more expensive foods.
“Last year, China bought 21.4 million metric tons (800 million bushels) of soybeans. That's equivalent to 75 percent of all U.S. soybean exports, which is tremendous. The real question is whether it will continue. I think it is irreversible if China's economic growth continues. I'm optimistic for our prospects there.”
Recent-day soybean prices, Bell says, are reflective of problems in South America, where analysts were forecasting record crops. Instead, he notes, the region has been hit with torrential rains, which have diminished crop quality/quantity and turned roads into muddy bogs, slowing field-to-port movement. An outbreak of Asian rust is expected to further diminish yield potential.
Soybean production for Brazil, Argentina and Paraguay could be reduced to last year's level, he says. “The market didn't anticipate that, and price will have to ration supply.”
Bell says he looks for 2004-05 soybean prices to range from $6.25 to $6.50 per bushel. “That's not $9-plus, but it's a lot better than the $4.50 we were seeing two years ago.”
Riceland's average booking price is running about $6.81, he says, with $7.25 “the magic selling target.”
But the fundamental change in the world situation points to “favorable prospects” for all grain crops, Bell says.
Several thousand farmers, agribusiness representatives, and others attend the two-day Mid-South Farm & Gin Show, sponsored by the Southern Cotton Ginners Association and Delta Farm Press.