What is in this article?:
- Looking ahead: soybeans will drive commodity markets
- Soybeans in driver's seat
- South America infrastructure
A key question in commodity markets, says John Anderson, American Farm Bureau Federation deputy chief economist, is, “What’s soybean acreage going to be in 2014?" But, he says, the even more relevant question is, "How many acres will corn give up, and to what extent will Corn Belt farmers shift away from corn and back to beans?"
MAX ANDERSON, from left, Decatur, Miss.; Quinton Mills, Forrest, Miss.; and Shelby Beason, Philadelphia, Miss., were among those attending the annual meeting of the Mississippi Farm Bureau Federation.
Soybeans in driver's seat
Soybeans have “kinda been following the corn market for a long time,” Anderson says, and “we’ve all got into a habit of looking at what’s going on with corn, and everything being driven by corn.
“But with commodity markets in transition, I think we’re moving to a point where soybeans will be in the driver’s seat for the next several months — maybe even the next year.
“While the corn supply situation has loosened up a lot with this year’s big crop, we’re still looking at a pretty tight soybean market, with a stocks-to-use ratio below 5 percent at the end of last marketing year, and expected to go to only 5 percent at the end of the current marketing year. That’s still a pretty tight supply situation.”
The U.S. always lives with a tighter soybean situation, he says, because of the large South American production that comes off in in the middle of the year.
“Even so, on the supply side, this market still has a lot of support for price.”
Looking at USDA’s usage figures, Anderson says, “We don’t see anything really dramatic for domestic crush or exports. There’s certainly upside potential in both of those sectors, but we’re constrained a bit by crop availability, and that’s a very supportive situation for price. To the extent there is support for grain prices now, it’s coming from the soybean market.”
Total use is projected at 3.2 billion bushels, he says. “We were using a lot more than that as recently as 2009/2010, so clearly there’s room for that number to grow somewhat, and that will continue to support the market for the next several months.
“Everyone is watching really closely what’s going on in South America — that’s the market’s focus right now. It’s pretty dramatic how South America has changed things. The U.S. does not carry the world’s stocks any more — it’s Brazil and Argentina.
“They’re carrying a lot more of the world’s stocks than we are. But Brazil continues to have issues with infrastructure, and Argentina with its exchange rate, and these are serious impediments to their international trade, which certainly helps us.”
The South American soybean crop this year is large, Anderson says, but “it’s too early to tell how it’s going to work out, and for now that uncertainty is supportive for U.S. prices.”
But he says, there is a potential downside for farmers with unsold soybeans. “You have to be concerned that if we get to February and it looks like South America is going to have a fantastic crop, with an above-trendline yield, we’d see support in the market start to erode.
“Right now, we’re supported by tight supplies, but that could come undone as we see more about what’s going to happen in South America. Be aware of this — and recognize it as a potential downside in your marketing plan.”