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'Shocking' soybean acreage numbers to pave way for higher prices, say analysts

Agriculture.com Staff 06/29/2007 @ 10:02am

With a quick glance at Friday's USDA-NASS acreage report, it's easy to see that soybeans have been the whipping boy for exploding corn demand. But, for soybean sellers in coming weeks, the beatings will be few and far-between, analysts say.

With a 15% decline in soybean acres versus a 19% jump in corn acres forecast in Friday's report, supplies will shift substantially when harvest time rolls around. This shift in supplies will likely create a new price point for beans, according to Roach Ag Marketing, Ltd., market analyst Shawn Hackett.

"The beans are a shocking number, plain and simple," Hackett says of Friday's USDA soybean acreage number. "This changes everything for beans. Bottom line, beans will need to find a new higher level to adjust to this new supply-demand dynamic."

Where will this price level settle? Hackett says there will be plenty of time in the $9 to $10 range in the coming months, and not just because of what we learned about U.S. soybean acres Friday.

"I still believe, and have for some time, that $9-plus beans are needed to stimulate South American acreage, and if weather turns sour in late July into August, then $10-plus is in the cards," Hackett says. "If you have bean puts on at this point, we would take them off. We simply do not see any reason that we will need that we will need that level of insurance given this new set of metrics."

Yet, other sectors of the industry may be seeking another sort of insurance if prices hover $9 to $10 later this summer and into this fall. From pod-fill in late July and August through to harvest, biodiesel producers and crushers may feel the strain of higher prices and seek feedstocks elsewhere -- namely South America -- according to Allendale Inc. market analyst Joe Victor.

"U.S. crushers are maintaining they want to pull their supply from the U.S., but it's just business. If they can go to South America and get it $1- or $1.50-per bushel cheaper and still keep their profit margins, they have to," Victor says. "It's not any means to try to hurt your suppliers domestically. In order to keep facilities open, to stay competitive, they've got to make ends meet."

While this outsourcing of soybean meal likely won't be long-term, especially after prices eventually level off, one longer-term effect of bullish domestic soybeans could also be seen in the southern hemisphere relating to next year's crop.

"By the time we get into our harvest, we'll be watching them plant in South America. If we are pushing $10 going into harvest, South America will plant every square acre to soybeans," Victor says. "It's not just Brazil and Argentina, but Uruguay and Paraguay too.

"By the time we get to harvest, the focus will be here, but South America will be a little grey cloud over our shoulder."

With a quick glance at Friday's USDA-NASS acreage report, it's easy to see that soybeans have been the whipping boy for exploding corn demand. But, for soybean sellers in coming weeks, the beatings will be few and far-between, analysts say.

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