February 6, 2004

 

 

World Soybean Growers To Benefit From Prevailing High Price

 

World soybean growers with sufficient supplies can reap profits from the current price at $8 per bushel, the highest price level since September 1997, said Abner Womack, co-director of Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri.
 

"This will turn around," Womack cautioned those attending the annual irrigation conference during MU Ag Science Week.

"The United States is running low on soybeans," Womack said. "But the world is not running short on soybeans and protein."

The soybean crop in Argentina and Brazil is one and a half times as large as the U.S. crop. South American farmers will start harvesting soybeans in a month as they get into their fall season.

The U.S. soybean crop last fall was below expectations because of drought, setting up the current short stocks.

A strong export market and strong domestic demand for soybean meal has forced the U.S. bean prices higher.

"China caught us off guard," Womack said. "Last year they bought 80 million bushels. Already this year they have bought 180 million bushels."

Strong beef prices coupled with relatively low corn prices has led to profits in the feedlots. So far, cattle feeders have been willing to pay higher prices for the soybean meal needed to balance their rations.

Early estimates called for 900 million bushels of U.S. soybeans to be sold abroad in this marketing year, Womack said. "Already 89 percent of those beans have been exported, or contracted for export."

Several scenarios could contribute to lower soybean prices.

A modest increase in acres planted this spring, combined with a normal yield, could start to rebuild U.S. stocks, Womack said.

Livestock feeders could back off on their demand for bean meal, or even start importing soybean meal from South America.

Export sales could be cancelled or moved to the next marketing year.

In the near term through harvest this fall Womack sees "rosy prices." That is reflected in strong futures market prices on the Chicago Board of Trade.

The FAPRI forecast for season-average price is $7.26 per bushel. Bean prices averaged $6.06 per bushel in September and gradually increased to a $7.25 average by December. "It will take a $7.50 price for the rest of the season to reach that $7.26 average for the year."

Assuming normal weather and a normal crop, FAPRI is projecting soybean prices to be about a dollar less per bushel for the 2004 U.S. crop.

When we see the South American crop start to come in "there will be a hiccup in the market," Womack added. "Any time you operate with a short supply, you will be dealing with a volatile market."

In answer to a question about when to sell soybeans in the bin, Womack said: "When soybeans start dropping to $7.70 per bushel it would be a good time to move some beans."

Looking at historic soybean charts, Womack said prices can stay above $7 per bushel for a few months. But, "That $8 price never lasts very long."

"When bean prices approach $8 per bushel, it gets difficult for the livestock feeders to make money," Womack said. "Demand begins to cool off."