PRICES CONTINUE TO RETREAT
futures traded to contract lows on January 2, 2002, rallied
by nearly $.40 by January 17, then declined by $.25 by January
25. The average cash price of soybeans reached a harvest low
of $3.985 on October 22, rallied to $4.40 on January 16, and
declined to $4.20 on January 25. The higher prices in the first
half of January were the result of a record pace of consumption,
concerns about dry weather in parts of South America, and a
reduction in the estimated size of the 2001 U.S. soybean crop.
pace of consumption of the 2001 U.S. crop continues. Based on
the USDA's weekly estimate of export inspections, shipments
of U.S. soybeans from September 1, 2001 through January 24,
2002 totaled nearly 607 million bushels, 17 percent more than
during the same 21 week period last year. Unshipped sales on
January 17 were reported at 276.4 million bushels, nearly 15
percent larger than outstanding sales on the same date last
year. For the year, the USDA has projected only a 1.2 percent
increase in U.S. soybean exports.
Census Bureau reported that nearly 153 million bushels of soybeans
were crushed in December 2001. The crush was 10.7 million larger
than during December 2000 and about equal to the record December
crush established in 1997. Crush during the first four months
of the 2001-02 marketing year totaled 580.6 million bushels,
3.1 percent larger than the crush of a year earlier. The pace
is slightly faster than the 2.1 percent increase projected by
the USDA for the entire marketing year. The large December crush
did lead to a modest increase in month ending stocks of both
soybean meal and soybean oil. At 2.873 billion pounds, oil stocks
were nearly 23 percent larger than the record December inventory
established last year and almost identical to the record inventory
at the end of September 2001.
is currently maintaining rapid pace, the market is concerned
about a slow down in the pace of exports. The rate of U.S. exports
typically declines beginning in April and May as the South American
crop becomes available. This year, there is additional concern
about exports to China due to new regulations relative to GMO
soybeans to be implemented in March. It appears that Chinese
importers have accelerated purchases of U.S. soybeans so that
receipts will occur before the new regulations go into effect.
It is believed that the new regulations will result in a larger
than normal seasonal decline in exports. The market will be
monitoring the rate of export sales, particularly to China,
to confirm the expected slow down.
to concern about Chinese export demand, weather conditions in
some of the dry areas of South America have recently improved.
Some yield loss has likely already occurred, but recent rainfall
should limit the losses. South American production is still
expected to be record large. It is unclear how the new Chinese
regulations will impact the demand for Brazilian soybeans. Officially,
Brazilian soybeans are GMO free, but unofficially it is known
that GMO soybeans are produced in parts of Brazil.
now some danger that soybean futures could retreat to new contract
lows over the next few weeks. March 2002 futures traded within
$.10 of the contract low of $4.1575 in early trading on January
28. Cash prices are expected to remain above the harvest lows,
but perhaps not by much. Assuming the South American harvest
reaches the record level projected by the USDA, the next opportunity
for higher soybean prices may be in the spring/summer months.
Higher prices at that time could be generated by concerns about
the 2002 U.S. soybean crop. Early forecasts by the private sector
are for stable soybean acreage in 2002. Prospective plantings
will be reported by the USDA on March 28. Without an increase
in acreage, average yield becomes a little more important. It
is obviously too early to anticipate growing season weather,
but forecasts will become increasingly common over the next
several weeks. If another large U.S. crop materializes in 2002,
prices would obviously remain under pressure, with new lows
in the cash price possible in July or August.
for producers holding soybeans which are still eligible for
marketing loan gains is limited to the cost of storing the soybeans.
There is additional risk for producers holding soybeans for
which marketing loan benefits have already been collected. Now
is the time to decide what portion of those soybeans to carry
into a potential weather market later this year.