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Market outlook: Exports help drive soybean demand

By Staff | Nov 20, 2009

SAC CITY – The 2009 harvest has been one of the slowest in recent years; yet prices for this fall’s near-record corn crop across the Corn Belt and record soybean yields nationwide will be influenced not only by the global commodity markets, but by the general economy.

“The biggest wildcard right now is the recession,” said Chad Hart, an assistant professor and grain markets specialist at Iowa State University. “It looks like we’re in the long, slow recovery period.” Hart ofered his comments Monday at ISU’s Ag Outlook and Management Seminar in Sac City.

Continued weakness in the U.S. dollar is helping exports. In fact, export demand has been the major story with soybeans, where exports have risen to more than 1.3 billion bushels in 2009, up from 1.28 billion bushels in 2008.

Since China continues to buy soybeans and soy products from the U.S., there’s a fairly low carryover, Hart said, who noted that China accounts for 54 percent of U.S. soybean exports.

To show how strong China’s demand has been, Hart explained that Iowa will produce 290 million bushels of soybeans in 2009 and China has already bought 510 million bushels of U.S. soybeans.

“The soybean market is primed to go either way,” added Hart, who noted that U.S. soybean production is on track to surpass 3.2 billion bushels in 2009, up from 2.9 billion bushels in 2008.

“If China quits buying,” Hart added, “that could pull the rug out of the export market. If they continue buying, however, that could send prices higher, since we don’t have that much play in the market due to carryout levels.”

While it’s unclear what the market will do, China has shown that it doesn’t want to hold a declining asset in the form of the U.S. dollar, so it has been buying soybeans, crude oil and other physical commodities, Hart said.

What about corn?

On the corn side, the U.S. crop is projected to surpass 13 billion bushels in 2009, up from 12.1 billion bushels in 2008. “This year, the market has been yelling for more corn and the trend looks positive for 2010,” Hart said.

In addition, total world corn production in 2009 is projected to decline somewhat. Bushels from China, which is the second largest corn producer in the world, are expected to fall off by 10 million metric tons, due to drought issues.

“China is not a corn importer yet, but we keep watching this possibility,” said Hart, who added that U.S. exports to Japan, which is the largest importer of U.S. corn, remain near normal.

The ethanol industry will continue to influence U.S. corn demand. By 2015, more than 5 billion bushels of U.S. corn will be headed to ethanol plants, said Hart, who noted that 80 percent of the U.S. gasoline supply is blended with at least a touch of ethanol.

Price outlook

Going forward, the most important ag statistics will be harvest progress, crop production and feed demand, Hart said. The USDA is indicating 2009 season-average prices in the neighborhood of $3.35 for corn and $9 for soybeans, he added. On Nov. 12, the futures pegged corn at $3.75 and soybeans at $9.52.

For 2010/2011, based on Nov. 12 futures, corn is pegged at $4.21 and soybeans are at $9.60, Hart said.

Contact Darcy Dougherty Maulsby by e-mail at yettergirl@yahoo.com.

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