John Pocock 1

March 17, 2010

3 Min Read

U.S. soybean farmers who’ve watched their commodity prices dip lower all winter have several good reasons to remain optimistic going forward, says Chad Hart, an Iowa State University agricultural economist.

“We’ve already suffered some sharp price hits downward as the market has taken into account the biggest U.S. soybean crop we’ve ever seen in 2009 and probably the biggest South American soybean crop ever seen in 2010,” says Hart. “Yet, soybean futures prices are still above $9/bu. and continue to show strong resilience.”

Several reasons are combining to give the market pause before driving U.S. soybean prices any lower, he adds. “The major story is the recovery in the general economy around the world that is helping our soybean-export picture,” says Hart. “My case in point is the USDA’s most recent export estimates for the 2010 soybean crop. Their estimate is 1.3 billion bushels, which is down only slightly from 2009.”

U.S. soybean exports reached record levels last year, Hart points out. If USDA’s export estimates hold, then 2010 will rank second all-time in soybean exports, and 2008 will rank third, he adds.

“We’re still seeing strong demand for U.S. soybeans,” says Hart. “While sales to China have tapered off a bit, they’re still buying; and we’re now seeing gains in U.S. soybean sales to Europe and Mexico.”

A soybean-buyer switch from U.S. to South American markets hasn’t occurred as swiftly as once feared, notes Hart. “The main problem in South America right now is getting their large crop to market,” he says. “We’re seeing considerable handling and shipping bottlenecks in Brazil, while soybean growers in Argentina are threatening strikes, due to low cash prices and high export taxes. So, the U.S. export window may stay open a little bit longer.”

Another positive sign for U.S. soybean prices is that U.S. soybean crush numbers have been running ahead of USDA estimates. The market will discover more about that potential trend and other information on soybean markets when USDA releases both its grain stocks report and prospective plantings report on March 31 at 7:30 CST, he adds.

Until then, the market is also eying positive developments in the biodiesel industry, says Hart. “The U.S. House and Senate have now both passed bills putting the biodiesel tax credit back in place,” he says. “Now, it needs to go through conference committee and be signed by the president.”

Also, the Renewable Fuels Standard that Congress has put in place calls for producing 650 million gallons of biodiesel by year’s end, which could create more demand in the fall for soybean oil in order to reach that goal, adds Hart. “After a dip down to only 500 million gallons of biodiesel production in 2009, it looks like our production should bounce back in 2010,” he says, “depending on what happens politically.”

For more information on soybeans and tips for marketing, visit the following Web link: http://cornandsoybeandigest.com/marketing/.

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