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Soybeans could Head to $16

09:46AM Jan 12, 2011

Soybean prices jumped in early trading following USDA’s crop reports released Jan. 12. USDA’s annual Crop Production summary showed 2010-11 soybean production at 3.329 billion bushels, down 1 percent from the November forecast and slightly lower than the average trade guess of 3.376 billion bushels. “It’s a very supportive report,” says Peter Georgantones from Abbott Futures, Minneapolis.

Despite being the second largest crop on record, U.S. soybeans are tight due to strong world demand, particularly from China. The U.S. carryout for soybeans is now 140 million bushels, down from 165 million bushels in December, according to USDA’s Jan. 12 World Agricultural Supply and Demand Estimates (WASDE). The market is “extremely tight,” says Georgantones. He expects this spring to be “a real dog fight” as corn, cotton, and soybeans all vie for acreage.
Worldwide, soybeans are not as tight as they are in the United States. “Brazil has a huge crop,” notes Georgantones. USDA projects a crop of 67.5 million metric tons, unchanged from its December forecast. USDA pegs Argentina’s soybean crop at 50.5 million metric tons, down from its December projection of 52 million metric tons and 3 million metric tons smaller than the 2009-10 crop, according to the WASDE report. Brazil’s projected soybean crop is 1.5 million metric tons smaller than a year ago.
“South American weather is turning very favorable,” Georgantones says. Widespread rain coverage is expected over the next week or so, with a broad band of the crop-growing regions of South America receiving 0.75 to 2 inches of rain. While it is too late for the corn crop there, Argentina’s soybean crop could improve if the rains materialize.
Soil moisture will not be a problem this spring in the United States, Georgantones says. But if wet weather continues to blanket the Corn Belt during the early part of planting season, corn could lose some acres to soybeans. 
“The math doesn’t add up as to how we are going to get all these acres we need,” Georgantones says. He expects some of the smaller crops such as barley, rice, and sorghum to give up some acres to corn and soybeans. “I think we’ll lose a half million acres of rice,” he adds.
If demand holds, Georgantones says soybean prices could soar to $15.50 or $16 this spring. “Food inflation is here,” he adds. “It’s great to be a farmer right now.”