February 7, 2002

Market Advisor: Soybean Use Continues Strong

By George Flaskerud, Crops Economist
NDSU Extension Service

The rapid pace of soybean use continues. Exports and crush are both ahead of last year. On the other hand, soybean prices are near seasonal lows. Can the rapid pace be sustained? Can prices improve?

While the crush is ahead of last year, the increase is largely factored into USDA’s soybean balance sheet. The amount of soybeans crushed during September through December of 2001 was 3.1 percent larger than a year ago according to U.S. Census Bureau data. In the January Supply and Demand Report, USDA projected that crush would be about 2.1 percent larger for this marketing year than for the last.

The pace of exports exceeded levels a year ago as of Jan. 24. The pace was at 85 percent for the current marketing year while it was at 74 percent last year, 64 percent two years ago, 69 percent three years ago and 80 percent four years ago. The pace of exports is total commitment (shipments plus unshipped sales) to date as a percent of total exports for the marketing year.

Major importers of U.S. soybeans include the European Union, China, Japan and Mexico. Together, they accounted for almost two-thirds of commitments as of Jan. 24.

China may be a key factor in the export outlook. The trade is very concerned about new regulations China plans to impose during March on genetically modified soybeans.

The strong level of use was a factor in a January price rally, along with other factors such as dryness in South America and a reduced level of U.S. production. Soybean May futures rallied to a high of $4.59 on Jan. 17 but then declined to a low of $4.29 on Jan. 28 as the weather in South America improved. They closed at $4.37 on Feb. 4.

South American production has become exceedingly competitive. The South American crop (74.65 million metric tons) was projected in the January report to be a record and almost as large as the U.S. crop (78.67 million metric tons). The crop was projected to be 8 percent larger than last year’s crop and 28 percent larger than the crop two years ago.

As a result, South American exports (29.27 million metric tons) were projected to exceed U.S. exports (31.77 million metric tons) during the 2001-02 marketing year. U.S. exports tend to dominate through March and then South American exports reign.

Exports and crop conditions will dictate price direction in the months ahead. Continued excellent exports or problems in South America could generate a price rally into the spring. However, if exports falter or projections for South America are achieved, the next best opportunity for a price rally may depend on U.S. growing conditions.

November futures achieved a spring/summer peak during July 2001 at $5.24, during May 2000 at $5.84 and during March 1999 at $5.22. USDA projected a seasonal average farm price of $3.90-$4.70 for 2001-02 versus $4.54 for 2000-01 and $4.63 for 1999-00.

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Source: George Flaskerud, (701) 231-7377, gflasker@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu