With a good U.S. soybean harvest nearly complete and South America production on a roll, cash soybean prices below $11 per bushel may be the norm next year and beyond, said Chad Hart, Iowa State University Extension crop markets specialist. Hart said Friday that growers should consider locking in higher soybean prices when brief rallies occur because “it looks like the market is digging in.”
The November 2013 soybean futures contract closed the week at about $13 after bouncing between about $12.60 and $13.20 since Oct. 1. It received a bump after the Friday crop reports.
USDA forecast soybean production at 3.26 billion bushels, up 3% from the previous forecast and up 7% from last year. If realized, production will be the third largest on record. Yields are expected to average 43 bushels per acre, up 1.8 bushels from the previous forecast and up 3.2 bushels from 2012. Area for harvest is forecast at 75.7 million acres, down 1% from both the previous forecast and last year.
U.S. ending stocks for 2013-2014 were forecast at 170 million bushels, higher than the September figure of 150mbu but about as expected. “We’re going to have ample supplies the next few years,” Hart said.
“If you’re in production ag, you’re often just trying to get to breakeven. That’s what it’s (soybeans production and price trends) showing for 2014, ’15 and ’16. We’re going to be playing the game of just trying to breakeven.”
Futures for 2014 trading months all reflect higher soybean supplies. The 2014 September and November contracts are both below $12. Distant contracts for 2015 and 2016 dip to $11.25-11.50.
“While November 2014 futures are at $11.50, that typically translates to a cash price below $11,” Hart said. “Nearby, with futures bouncing between $12.60 and $13, the market seems to be factoring in good export sales to balance a good U.S. bean crop coming on line.”
But supply pressure is likely to increase, as Brazil and Argentina crops come in next spring. “If South America gets even an average crop, we may be looking at Brazil passing us at the No. 1 spot in production,” Hart said. “And Argentina, with about 50 million tons of production, that’s a lot of beans to hit the market.”
Of course, price volatility has been the norm in recent years. Weather, political unrest, even oil prices can impact other commodity prices. A report Friday from the University of Illinois farmdoc program noted that “history suggests that it is quite unlikely that corn or soybean prices will soon experience another long run of above average prices.
“However, history also shows that it is unusual for a long run of above average prices to be followed by a long run of below average prices. The more likely outcome is a series of positive and negative runs of varying but shorter lengths.”
That indicates that farmers should look for good marketing opportunities when they are available. “Marketing has been easy the past five years,” Hart said. “But for the next few years, we will likely revert back to the way were before 2006, again, often just trying to break even.”