New highs for soybean prices
Three weeks ago we pondered the question of whether or not marketing year highs had been established in the corn and soybean markets. It was noted that February highs had not occurred previously and that odds favored new highs, particularly in the corn market.
As it turns out, new marketing year highs have been established for soybean prices, but not for corn prices. The average overnight cash price of soybeans in central Illinois reached a high of $7.705 on May 25, $.20 above the February high. In addition, November 2008 and November 2009 prices reached new contract highs and November 2007 futures traded within $.01 of its contract high. Futures settlement prices on May 25 translated to marketing year average farm prices of about $8.25 for the 2007-08 marketing year, $8.45 for the 2008-09 marketing year, and $8.15 for the 2009-10 marketing year. The highest marketing year average farm price to date is $7.83, established in 1983-84.
The strength in soybean prices during the month of May reflected higher prices for both soybean oil and soybean meal. July 2007 soybean oil futures increased about $.03 per pound while July 2007 soybean meal futures increased about $20 per ton. Soybean meal prices reversed the lower trend that started in late February, while soybean oil prices continued the upward trend that began in early November 2006. July oil futures are about $.11 (44 percent) above the early November low, while July meal futures are nearly $50 (29 percent) above the early November low, but nearly $30 below the late February high.
Much of the recent strength in soybean prices began with the USDA's May 11 forecast of supply and consumption for the 2007-08 marketing year. Prospects of a sharp decline in U.S. soybean inventories by the end of the 2007-08 marketing year result from a combination of a decline in harvested acreage from 2006 (8.5 million), a lower U.S. average yield (1.2 bushels), and annual consumption remaining near 3.04 billion bushels. Soybean prices have received additional strength from less than an ideal start to the U.S. growing season. Excess moisture in parts of the western Corn Belt, dryness in parts of the eastern Corn Belt, and drought in the southeast all contribute to uneasiness about the 2007 crop. Dryness in some areas of China has also been noted.
The rate of consumption of U.S. soybeans remains high. The USDA reports cumulative exports through May 24 at 966 million bushels, suggesting that only 114 million bushels need to be shipped during the last 14 weeks of the year to reach the projection of 1.08 billion for the year. Through March, however, USDA export estimates exceeded Census Bureau estimates by 30 million bushels. Such a large difference is unprecedented and adds some confusion to the export picture. If the difference has persisted, then exports during the last 14 weeks need to total 144 million bushels. The difference between the two estimates amounts to about 2.1 million bushels per week through the end of August.