What's the Next Turn on the Soybean Roller Coaster?

October 21, 2015 12:00 PM

Soybean prices have taken a bit of a roller coaster ride the past three months, according to University of Illinois ag economist Darrel Good. Trading has ranged between a high of $10.45 on July 14 to a low of $8.53 on September 11. Currently trading is around $9.00.

The obvious question is: What happens next? Good says experts don’t agree on the answer.

“Some analysts expect a larger U.S. crop forecast, large crops outside of the U.S. and weak demand for U.S. soybeans to push prices below $8.00,” he says. “Others point to the elevated production risk associated with the El Niño event, the current strong demand for U.S. soybeans and the potential for prices to move back above $10.00.”

The current price volatility is caused by several factors, Good adds. There are changing expectations about the U.S. soybean crop’s size, for example, and many are unsure how El Niño will affect world oilseed and vegetable oil production for 2016.

A big question analysts want answered – will average U.S. soybean yield secede the USDA estimate of 47.2 bu. per acre? Equally important is the potential for another record-breaking crop in South America, plus a risk of weaker Chinese demand.

“That combination would point to U.S. soybean exports during the current marketing year less than the current USDA projection of 1.675 billion bushels,” Good says. “A larger crop estimate and smaller exports, then, would point to larger year-ending stocks and lower prices.”

On the other hand, will prevent plant acres present itself as a wildcard for this year’s crop? FSA estimates there were 2.22 million prevent plant soybean acres this year. Also, export demand has been strong the past few weeks, Good notes. That’s promising, but continued strong exports will hinge in part on the 2016 South American crop.

“Those friendly to soybean prices have expectations of a shortfall in production there based on the El Niño weather event,” he says.

Could potential biofuel policy changes also play into enhanced demand for soybean oil, Good asks? Time will tell.

Bottom line, the odds are in favor of continued volatility, Good concludes.

“The uncertain soybean supply and consumption prospects suggest that soybean prices may continue to trade in the wide range of the past three months,” he says. “Fairly dramatic changes, however, would be required to alter prospects for abundant U.S. and world inventories and push prices above the high experienced in July. Modest short-term rallies based on other factors are more likely.”

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Spell Check

k.m. kirk
new holland, OH
10/22/2015 05:21 AM

  I don't believe that there is a large soybean crop in the U.S.

10/22/2015 08:36 AM

  While the markets don't always operate on fundamentals, thank goodness the markets never operate on a farmers emotional wishful thinking or belief in what the national crop size is. I understand the farmers when they feel their crop is worth more than it might be presently valued especially when it's at or below the cost of production. I feel the same way about my skills as a software engineer especially working for the government where I'm at the top of my pay scale and have not seen a total COLA of more than 3% in a decade or more. I'm too old to move to another job so that's not an option either. For the farmer, if they haven't overextended themselves, there's always next season. Best wishes from Maine for a great harvest!


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