According to University of Illinois ag economist Darrel Good, recent soybean prices have come as somewhat of a surprise, given that domestic crush has slowed and a big South American harvest looms. But Good says there are several reasons for the current modest price strength.
1. USDA did not raise the forecast of the South American crop in a March 9 report, as many predicted it would.
2. Brazil’s currency is strong enough that U.S. soybeans could be a little more competitive in the world market.
“If that strength persists, there will also be less incentive to expand soybean acreage in Brazil in the coming year,” he adds.
3. More people are discussing yields risks for the 2016 soybean crop, and this may be adding to recent price strength, Good says.
4. The pace of U.S. soybean exports is hovering just under record exports from 2015.
Prices can continue to rise, Good says, but only if one of two things happen.
“For soybean prices to continue to move higher, expectations of a stronger demand environment will have to emerge or conditions will have to begin to point to a much smaller U.S. soybean crop in 2016,” he says.
Good shares additional analysis at http://farmdocdaily.illinois.edu/2016/03/surprising-strength-soybean-prices.html.
Kevin McNew with Grain Hedge points out that private analysts have pegged the Brazil crop at 99.7 million metric tons, higher than their previous estimate of 98.5 million metric tons.
“Still, that’s fractionally lower than the USDA’s 100 million metric ton estimate,” he says.
Marketers expect to gain further insight after USDA releases its prospective plantings report on March 31.