Even with the ever-changing levels of the grain markets, soybeans prices and returns are poised to stay high.
U.S. stocks of corn, soybeans and cotton are extremely low, Westhoff says, which is putting a lot of pressure on acreage decisions this spring.
“There are reasons to want to increase acreage for every major crop,” he says. “The markets are almost demanding additional acres for corn, cotton, soybean and wheat this year.”
The question is, Can they get it? Who will win this battle of acres? “We think there’s a chance we will see an increase in total acres dedicated to crop production in 2011, compared to 2010, maybe getting back to the levels of acres we saw in 2008.”
Westhoff says FAPRI expects corn and soybean prices to stay at levels of the current marketing year, which is good news for farmers.
Rising soybean prices resulted in record soybean net returns over variable expenses in 2010/11, and returns could increase again in 2011/12. Soybean prices and returns remind high throughout FAPRI’s baseline.
Strong demand worldwide is supporting these high prices, Westhoff says. One key soybean consumer is China, where demand continues to expand. “It’s been phenomenal how fast Chinese soybean imports have grown over the last several years,” he says. “We would expect to at some point to see a slow in that growth. For the near term, they are a very big market for our soybeans.”
The Wild Cards
Even with the rosy outlook for soybeans, risks do exist.
“The weather will continue to be an important fact, as it always is,” Westhoff says. “With stocks being as tight as they are right now, it’s safe to say the market is going to move around a lot.”
He says a number of factors could cause disruption, such as weather, the oil market, economic news or a similar disaster to Japan.
“Volatility seems to be the name of the game right now,” Westhoff says. “We don’t have any reason to predict it will settle down soon.”
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