That supply and demand report issued Tuesday is raising questions, but an economist with the American Farm Bureau Federation sees some interesting dynamics ahead. "We are looking at a situation where soybeans, rather than corn, could very well become the market leader in the U.S. grain and oilseed complex," says Todd Davis, American Farm Bureau Federation economist. "Typically corn prices usually help drive the market prices for the other grain and oilseed commodities, but given what we now know, soybeans are ready to move to the forefront."
He's pointing to the fact that this week's report held corn largely unchanged, but soybean supply estimates fell and U.S. exports increased to help make up for smaller South American crops. Davis explains that Tuesday's report, coupled with prospective planting estimates from late March, indicate the United States is in the rebuilding mode in regard to the nation's corn supply, as U.S. farmers are expected to plant 95.9 million acres - the highest acreage since 1937. But soybean supplies are likely to move in the opposite direction and become much tighter next year as 2012 U.S. soybean plantings are expected to decline by more than 1 million acres compared to 2011.
Arlan Suderman, market analyst, Farm Futures agrees that "we are in a transition period from corn leading toward soybeans leading."
He notes that the market is still being led by the same dynamics - the expansion of the middle class in China and surrounding areas of East Asia, which is driving demand for protein in the diet.
"The first emphasis was on more corn to feed livestock as demand for meat increases in that region of the world," he notes. "Ethanol simply added to the demand curve for corn, and those dynamics drove corn prices higher to the point where world producers made corn a priority at the expense of soybeans."
He adds, however, that it also takes protein to produce protein and soybeans are one of the primary sources of that protein.
"Global soybean stocks began to slip as acreage shifted to corn production, with South American drought accelerating the shift," he says. "The world will soon realize that it needs to put an emphasis on soy protein as well, taking prices high enough to buy more acreage in available areas of the world, like Brazil."
Soybeans were clearly the newsmaker in the April supply and demand report. U.S. soybean stocks were cut by 25 million bushels to 250 million bushels. The decline was due to an increase in the expected amount of soybean crush and stronger U.S. exports to make up for the South American shortfalls.
Essentially the market fundamentals - the fight for acres - continues.