SOYBEAN PRICES RECOVER
prices have rebounded from the sharp decline following the bearish information
in the USDA's January 10 reports. March futures traded to $5.44 following the
report, but settled at $5.69 on January 24. November futures recovered from a
low of $5.025 to settle at $5.285 on January 24. The average spot cash price in
central Illinois declined to $5.41 on January 16, but rebounded to $5.615 on January
24. That price was $.14 below the early January high. The recovery has been mostly
driven by higher soybean meal prices.
A number of
factors have contributed to the recovery in prices over the past week. These include
projections of a decline in U.S. soybean acreage in 2003, drought conditions in
important producing areas of the U.S., ideas that domestic meal feeding is being
driven higher by widespread low temperatures, hot weather in parts of Argentina,
and a rapid pace of U.S. export sales. More information about prospective acreage
and yields in the U.S. in 2003 will be revealed over the next few months, as the
USDA releases its Prospective Plantings report on March 31 and spring weather
prospects become clearer.
There are three sources
of information about the pace of U.S. soybean exports: the USDA's weekly Export
Inspection report, the USDA's weekly Export Sales report, and monthly estimates
by the Census Bureau. The Census Bureau figures are the official estimates and
are reflected in the USDA's historical supply and consumption estimates. It is
not uncommon for these three sources to have different estimates. This year, however,
there is a very large difference in the estimates of soybean exports from these
sources. Census Bureau estimates are only available for the first three months
of the 2002-03 marketing year, September, October, and November 2002. Cumulative
exports for those three months are reported at 297.6 million bushels, 50 million
bushels (14.6 percent) less than during the same three months last year. In contrast,
the USDA Export Sales report showed cumulative exports during that period at 317
million bushels, 18 million bushels (5.4 percent) less than indicated for the
same three months last year. Finally, the USDA's Export Inspection report showed
cumulative shipments through November 2002 at 339 million bushels, 16.8 million
bushels (4.7 percent) less than during the same period last year.
large difference among export estimates have occurred before, most recently in
1998-99. In that year, the difference resulted in the USDA carrying a very large
estimate of residual use of soybeans in the supply and consumption balance sheet.
It will be important to see if the Census Bureau estimates continue to fall below
those from the USDA, and if so, how the difference is resolved.
other issue regarding U.S. soybean exports is the large outstanding sales to China.
As of January 16, 2003, the USDA Export Sales report indicated that 123.5 million
bushels of U.S. soybeans had been shipped to China since September 1, 2002. That
is 21.6 percent more than cumulative shipments at the same time last year. Unshipped
sales to China on January 16 totaled 97.2 million bushels, four times as large
as unshipped sales of a year ago. Until those soybeans are shipped, there is always
some concern that the sales could be cancelled. That concern is most prevalent
this time of year, as the South American harvest gets underway.
prices are expected to continue to be well supported by a combination of 2003
supply concerns and a high rate of exports. These factors will likely more than
offset the effect of a slow down in the rate of domestic processing of soybeans.
The slower rate of processing has a more positive impact for soybean meal prices
than for soybean oil prices due to the relative product yield from the 2002 crop.
For the period September through November 2002, the average oil yield per bushel
of soybeans processed was 11.35 pounds, 0.21 pounds (1.9 percent) higher than
the average yield of a year ago. On the other hand, the average meal (plus hulls)
yield was 47.12 pounds, 0.37 pounds (0.8 percent) lower than the average yield
of a year ago.
March 2003 futures may find some technical
resistance in the gap left following the January 10 USDA reports and at the pre-report
high near $5.85. Recent lows should provide support. November futures prices have
already exceeded the pre-report high. Fundamentally, prospects for a large South
American harvest is still the most limiting price factor at the current time.
University of Illinois