November 2, 2011
Soybean prices will likely stay below the $13/bu. range for the near future as global economic worries continue to weigh down market prices for corn and soybeans, says Darrel Good, University of Illinois Extension marketing specialist.
“Last week, we did get some initial bullishness in soybean prices when the European Union averted a default situation in Greece,” says Good. “However, as we can see this week, what the European Union is currently doing to improve its financial situation isn’t widely viewed as a permanent solution. Many believe that they’re still kicking that can down the road.”
Worries over the strength of commodity markets (both corn and soybeans) in a down economy will likely continue for some time, Good notes. “For prices to increase, the market needs to see an indicator of economic growth, both from our domestic economy and the world economy,” he says. “Overall, the fundamentals for corn and soybeans are a bit negative right now. As long as we have an economy that’s in the dumpster, we will probably continue to have concerns over future demand.”
For now, U.S. soybean supplies appear to be plentiful. “Domestically, the U.S. soybean crush is pretty low for this point in the year, and there is nothing to indicate that we’ll run out of soybeans,” says Good. “With consumption slowing, we should have ample supply, with no need for rationing or for prices to go higher. And next week, the USDA’s crop production numbers may end up being a bit larger than the October forecast, which would also dampen prices somewhat.”
Global financial conditions show more economic signs that would lower future soybean prices somewhat rather than increase them, he adds. “There are some indicators that the growth rate in China is slowing, but its growth rate is still very good,” says Good. “There is no indication yet that China plans to cut back on its commodity purchases. However, they could choose to buy more from other countries, like South America, which is getting off to a good start with its newly planted soybean crop.”
As a result, there are few near-term signals that a significant soybean price increase is on the horizon. “The next opportunity for soybeans to increase in price would be if weather problems develop in South America, if an economic recovery here or in Europe comes sooner than expected, or if next season’s growing conditions begin to look unfavorable for U.S. producers,” Good says.
For more information on grain and oilseed price outlooks, visit the Corn & Soybean Digest marketing page.
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