Hold on, better soy prices ahead, analysts say
The U.S. soybean market is expected to follow corn prices higher in the near future, but given a poor basis currently, producers are urged to wait to sell soybean supplies, analysts said on Tuesday.
History shows the soybean market has a tendency to reach its highs between April-May, and in a short supply year, during July-August.
This year, soybeans could see its highs mirror corn prices, analysts said.
Because soybeans is a commodity so attached to corn, and history shows the corn market reaches its peak in March-April, producers could space some 2006 crop sales out during this period, Joe Victor, Allendale Inc., said.
"Producers might even make some active sales and the heaviest percentage of 2006 crop sales during March-April time frame," Victor said. "As long as there remains carry in the market, producers could extend and piecemeal sales all the way out to August."
Ray Grabanski, president of Progressive Ag Marketing, said the outlook for soybean prices remain good, and therefore, producers should wait for that higher price.
"The 2006 basis is terrible," Grabanski said. "Until the soybean price is twice as high as corn, we are under-priced."
Grabanski added, "For 2007, I think producers are better off raising corn. For 2006, as long they are raising more corn in 2007, why should they sell their '06 beans? Their acreage switch will help the 2007 bean prices."
Meanwhile, with a U.S. soybean carryout at a very large 595 million bushels, the market is fortunate weekly exports, at 885 million bushels so far this marketing year, are 32% higher compared to a year ago. Plus, the traders continue to talk huge acreage shifts to corn.
"Otherwise, the soybean market doesn't have a story right now," Grabanski said. "The soybean market better lose acres. We can't plant more soybean acres. We already have a lot of bushels on hand."
So, what about the soybean price heading toward spring?
"Soybeans will be two times the price of corn," Grabanski said. "I suppose that's the best way to put it. Corn at $4.00, beans will be at $8.00 per bushel. If corn goes to $4.50, beans need to be $9.00. If corn goes to $5.00, we need beans at $10.00. And that still isn't going to attract soybean acres."
Once enough acres get switched to corn, the soybean market could take on a life of its own, Grabanski said.
"If we switch 14 million acres away from soybeans, and we get a good crop, soybeans could take the lead in 2007," Grabanski said. "We already expect a soybean shortage in 2008, but the soybean market could get interesting in 2007."
Yet another life soybeans could take on is the demand for biodiesel production.
The latest estimate for 2006 soybean use for biodiesel is 240 million bushels, Victor said. "I've learned the usage estimate is expected to double to 480 million for 2007, and remain at that level for 2008."