Outlook: Bullish soybean market
URBANA, Ill. – “Although the corn market has received the lion’s share of attention over the past two months, the soybean market has become the focus of more attention in recent weeks,” said University of Illinois Agricultural Economist Darrel Good.
The attention has been the result of the surprising USDA Dec. 1 stocks estimate, adverse weather conditions in South America, the demise of the ethanol blender’s tax credit and prospects for small year-ending stocks.
Corn prices have declined marginally since the first of the year, but soybean prices, particularly for the 2012 crop, have increased. The strength in the soybean market is being generated by deteriorating crop prospects in South America and expectations for fewer planted acres in the United States this year.
In last week’s World Agricultural Supply and Demand Estimates report, the USDA lowered the projected size of the 2012 South American crop by 215 million bushels, or 4.3 percent. That reduction comes on the heels of a 90 million bushel reduction last month. At 4.765 billion bushels, that crop is now expected to be 4.6 percent smaller than the 2011 crop and 3.4 percent smaller than the 2010 crop.
The expectation for fewer acres of soybeans in the United States this year stems from the 1.3 million acre increase in winter wheat seedings and the expected 2 to 3 million acre increase in corn plantings.
The recent change in the relationship between new crop corn and soybean prices has reduced the potential profit advantage of a corn-after-corn rotation over a soybean-after-corn rotation.
According to Good, “Average yields and projected costs still favor corn in those areas where corn-after-corn is common, but the margin has narrowed substantially since the first of the year and is still narrowing.”
The average price of December 2012 corn futures and November 2012 soybean futures during February establish the spring price guarantee for crop revenue insurance products and may have some acreage implications.
March and November 2012 soybean futures have moved to the highest level since late October 2011. “Ongoing concerns about the South American crop should provide additional support, particularly if United States export activity remains strong. New crop prices may also strengthen due to concerns about reduced soybean acreage in the United States, but those concerns may not be well founded. A rebound in March and November futures might be limited to near the $13.00 area for now,” said Good.
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