USDA Report Could Send Soybeans to $15/bu.

August 11, 2011 04:57 AM
USDA Report Could Send Soybeans to $15/bu.

USDA’s Crop Production report released this morning caught just about everybody by surprise, and while the numbers were bullish for all of the major crops, the soybean numbers were the highlight. “Soybeans may have the most upside price potential,” says Jack Scoville, vice president of the Price Futures Group, Chicago. Scoville was the guest commentator on this morning’s MGEX conference call.

USDA lowered estimates for planted acreage, harvested acreage, average yield, and carryout on soybeans. According to today’s report, USDA estimates soybean production at 3.06 billion bushels, down 8% from last year. In its first field-based survey of the year, USDA put this year’s average soybean yield at 41.4 bushels per acre, a drop of 2.1 bushels from last year.
The department’s estimate on harvested acreage of 73.8 million acres fell 1% from June’s estimtate and is a 4% decline from 2010. Planted area fell fractionally from USDA’s June estimate to 75 million acres. 
Scoville expects November soybean futures to retest and break through their highs near $14/bu. “Then $15.25 and $15.50 would be the next target for the bulls,” Scoville says.
Chad Hart, agricultural economist with Iowa State University, recommends soybean producers sit tight before placing a hedge in the futures market. “I’ve been waiting for the soybean market to blow up,” says Hart. “It’s been so tight for so long.”
If November beans close limit-up today, a real possibility, prices tomorrow are likely to break through $14/bu. “This could be a two-day report,” Hart says. “Producers should give it at least a couple of days to play out.”
A number of factors have come into play this year to make the soybean crop vulnerable. First, a wet spring delayed planting, especially in Ohio, Indiana, and the northern Corn Belt. Then major flooding in the Mississippi and Missouri River valleys washed out some planted acreage, while drought in the southern plains dried out fields and scorching temperatures in the heart of the Corn Belt in July cut yield potential.
“Yields were taken down significantly in the mid-South, South and Midwest, especially the western Midwest,” says Scoville. “It seems that just about everyone was affected by the bad weather.”
USDA also decreased 2011-12 U.S. ending stocks of soybeans to 155 million bushels, well below the average estimate of 172 million bushels and a 20-million-bushel decline from last month’s estimate.
Despite the extremely bullish report on soybeans, the crop has yet to be harvested and yields are still not made. “Good weather conditions in August could help bring this bean yield back,” says Hart. Temperatures in the mid-80s with decent rains—similar to this week’s weather across much of the Corn Belt—could help pods fill, he adds.
“If we do have a good finish to the crop year, we could see some of these production numbers go up, particularly on corn and soybeans. I’m not concerned we need to see lower estimates moving down the road,” says Scoville.
In what might be the best news yet for soybean producers, Scoville says that even if weather conditions remain favorable and yields improve somewhat, he expects the soybean market to remain firm all year.
Find the report data and expert analysis of today's reports.


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