Soybean price has nine lives, analyst says
Soybean prices dropped sharply following the USDA's March 31 Prospective Plantings report, but have regained some of that loss. A wide variety of factors will continue to have a bearing on price movement, according to Darrel Good, University of Illinois Extension economist.
November soybean futures declined by about $.30 in the aftermath of the USDA's report showing producer intentions to significantly increase soybean acreage in 2006, Good said in a weekly market outlook. That contract traded to about $5.85, only $.43 above the contract low reached in February 2005. The average central Illinois spot cash bid dropped by $.33 and traded within $.15 of the marketing year low of $5.15 established on October 10, 2005.
It appeared that prices would continue under pressure, with the potential of new marketing year lows in the cash market, Good stated. On April 17, however, November futures traded above $6.00 and were only $.13 below the pre-report settlement price. The central Illinois cash price recovered by about $.10 during the shortened trading week ended on April 13.
"A number of factors have helped stabilize the soybean price in the face of historically large stocks and acreage prospects," Good said. "The USDA's monthly reports released on April 10 contained a smaller estimate of the South American crop currently being harvested. While production is expected to be record large, the current estimate of 3.83 billion bushels is nearly 75 million bushels smaller than the March forecast, reflecting lower yield prospects in Brazil and Paraguay."
On the export front, the Census Bureau estimate of February 2006 soybean exports was about 2 million larger than the USDA estimates for the month. Cumulative marketing year exports through February were about 7 million larger than the USDA estimates. Weekly export sales of old crop soybeans remains brisk in light of the large South American harvest, averaging about 13 million bushels per week for the two weeks ended on April 6, Good said. Sales to China for delivery next year total about 65 million bushels. Sales to all destination during the 2006-07 marketing year totaled 94 million bushels as of April 6. No new crop sales had been reported at this time last year. The new crop sales to China served as a reminder of the large appetite for soybeans in that country.
Soybean prices may also garner some support from the industry report of the soybean crush during March, Good wrote. The National Oilseed Processors Association reported that member companies crushed nearly 142.9 million bushels of soybeans in March 2006, more than anticipated by the market. The larger than expected crush also resulted in a more modest increase in soybean oil stocks than anticipated. "Finally, soybean prices have once again found support from speculative buying, based in part on continued price increases for other commodities, particularly crude oil and precious metals," Good said.
He added, "The rapid turn around in soybean prices will result in a changing message to soybean producers relative to planted acreage in 2006. Even though corn prices remain well supported just below the contract high of $2.75, rising soybean prices will tend to reinforce producer decisions to increase acreage in 2006. As corn planting continues to be interrupted by rain events, there may also be less incentive to increase corn acreage. Prospects for a record large soybean crop in the U.S. remain in place."