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Corn+Soybean Digest

Expect A Massive South America Soybean Crop

U.S. soybean growers have benefitted recently from grower misfortunes in South America to increase their export market share, but that may come to an end soon, says Chad Hart, Iowa State University agricultural economist.

“All the current indicators point to the potential for record South American soybean production,” he says. “The growers there have really shifted a lot of acres to soybeans, and despite recent reports of disease outbreaks, the South America crop is very likely going to be huge. So, as we go forward into this marketing year, we will face much more competition for soybean exports than we’ve had the last couple years.”

Typically, more competition with South America for soybean exports means lower prices for U.S. growers, notes Hart. “The bad news is that the soybean market keeps turning bearish,” he says. “This marketing year, a record U.S. corn and soybean crop, combined with expectations for a record soybean crop in South America, is having a negative offset to what would typically be an upward seasonal price trend.”

February is usually the time when grain prices start to build up to their seasonal peaks in April, May and June, but the trend for soybeans is more downward this year, “mainly due to the looming crop coming out of South America,” adds Hart. “However, the good news is that the Chinese continue to buy U.S. soybeans.”

Brisk grain sales this winter may eventually help to boost prices somewhat this spring. “A lot of U.S. corn and soybeans are being sold right now due to the quality concerns that came with harvesting a wet crop,” says Hart. “Those sales are also working to decrease prices. However, once we clear that poor-quality-grain glut out of the market, we might see some price recovery for farmers who still have good quality corn and soybeans in storage.”

Other factors that could potentially boost soybean prices this year include the strength of the dollar and crude oil prices. “Lately, the soybean market has not enjoyed the outside market support that might have helped to strengthen prices,” says Hart. “Instead, over the past month, the dollar has strengthened and crude oil prices have weakened. While we did see the dollar weaken and crude oil prices increase somewhat this week, that occurrence isn’t enough yet to make a trend.”

Also, the recent failure by Congress to renew the biodiesel tax credit is having a negative effect on soybean prices, Hart points out. “If we see evidence that legislative efforts to restore that tax credit become promising again, that would help soybean prices to move up a bit,” he says.

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