“It’s a very exciting time to be a Mid-South soybean producer,” says David Glidewell, Mid-South regional manager for ADM at Memphis.

“Thanks to some scattered showers over the past couple of months, we have potential for a good crop over much of the area, with soybean prices over $16, and at one time over $17 cash price for new crop beans,” he said at the Mississippi Farm Bureau Federation and Mississippi Soybean Association joint soybean advisory committee meeting at Grenada, Miss. “But, drive 80 to 100 miles north of Memphis, where the drought has been ongoing, and the difference is stark.

“It’s no big secret it’s very dry in central Illinois, central Indiana, and other areas, with some pretty dire situations. Southern Indiana, southern Illinois, western Kentucky, are among the toughest areas. North of there, in Minnesota, Nebraska, Wisconsin, Iowa, and South Dakota, where they’ve had more rain, yield potential for corn and soybeans is better, although it has started to get dry in those areas, too.”

The severe drought, Glidewell says, “is being compared to droughts of 1988 and 1980, and some say it could be similar to 1952, when there was the drought of all droughts.

Report: Mississippi soybeans need moisture to finish strong

“We still have time to make a good crop — but if we get to Aug. 1 or Aug. 10 and the Midwest hasn’t had some rain to keep their crop meeting its potential, I think we’ll see higher futures prices.”

Several factors have played a role in bringing the market to its current lofty level, Glidewell says.

“There’s the ever-increasing appetite for soybeans around the world, most notably in China. Then last year South America had a 20 million metric ton shortfall versus what had been anticipated for their crop, and that started soybean prices rallying.

“The market was expecting the U.S. to pick up that shortfall with this year’s crop. But then it looked as if we were going to reduce soybean acres in favor of corn, and very quickly we were able to trade $12 to $13 soybeans for fall delivery. After that came the weather concerns in the Midwest, and prices rallied sharply.

“Some analysts will say the soybean market has not yet done the job of rationing — we’re getting close, but we’re not there.”

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This year’s world soybean forecast is for 236 million metric tons, Glidewell notes, and the 2012/13 forecast is for just over 267 million tons.

“That’s assuming South America will recover to a normal yield and will increase acreage to the maximum they practically can — most analysts would say a 5 percent acreage increase is about all they can manage.

“If this occurs, we could expect to see world soybean production up sharply, although in July the expected increase was reduced by about 1.5 percent, mostly due to worsening June-July conditions in the U.S.”

In the 2012/13 forecast for U.S. soybeans, he says, the projected yield in the last Supply and Demand report was 40.5 bushels per acre, which would result in 130 million bushels of ending stocks, for a very tight 4.2 stocks-to-use ratio.

“Many analysts are saying when we set the highs last week, $16.91 ½ for Nov. 2012 soybeans, most of the trade was trading based on what they thought was a 38-bushel national average. Soybeans were down 64 cents today (July 23), because the market’s perception of yield had changed based on a more favorable weather forecast in the Midwest, and it illustrates how sensitive the market is to weather forecasts.

“But, if take that 130 million bushel carryover and reduce the national yield to 38 bushels per acre, you end up with a negative 74 million bushel carryover. If you drop the national average to 36 bushels per acre, you would have a negative carryover of 224 million bushels. We all know it’s impossible to have a negative carryover.”