When you consider the estimated carryover from this year, it gets us back into a tight situation on soybeans.

“We’re basically seeing production down from last year, after a record year in 2009 and a near-record year in 2010, so it’s an ever-tightening situation. Basically, we’re seeing a trend in crushed being cut back.

“We saw our exports pick up in 2009 and 2010, and we exported more whole soybeans than meal and hulls to China because China has increased its crushing capacity. This, along with the lower value of the dollar, is helping our exports.”

The U.S. is down to a stocks-to-use ratio with soybeans of about 5.2 percent.

“When you look at the world production of oilseeds, the U.S. is the top nation in soybean production, but South America as a whole certainly has surpassed us in terms of production, market share and exports. With reduced production this year, we’ll probably see our export share drop from about 45 percent down to about 41 percent, and that’s partly driven by supply.”

China makes up about 60 percent of U.S. exports, so whatever China does will impact soybean prices and the soybean market in this country, says Smith.

“Soybean production in South America has grown by about 2 percent in 2011, and that growth has come from Argentina, because Brazil actually had a drop in its production,” he says. “Financing was an issue for them this year, so that’ll be something to watch as they plant the 2012 crop.”

China’s production of oil has been increasing, noted Smith. “They’re using more commercial feed which has higher protein, and they’re using more soybean meal and other protein sources in those feeds.”

In South America, the increase in soybean oil production has been going to biodiesel production instead of exports, he says.

“The supply and demand situation with soybeans basically is similar to that with other crops – they’re all starting to mirror one another. If things work out as they are forecast right now, I think we’ll see some price competition in the spring.”

However, soybeans are not competitive with corn, cotton and peanuts in Georgia, according to current prices forecasts, says Smith. “You have to get better yields than the average for Southern states before soybeans are competitive with other crops.”

There are about 325 million acres in principal crops this year in the United States, he says. “I don’t see a lot of new acres coming in because a lot of them came in this year. Some pine trees actually got put back into agricultural production this year in the South, and it probably cost about $3,000 per acre to convert them back to row crops.”

The bottom line is that there’s a tight supply situation for soybeans again this year, says Smith. “Exports and the value of the dollar will be keys going forward. As China’s GDP continues to grow, they’ll have an increasing demand for protein, and we’re in a position to provide it for them.”

phollis@farmpress.com