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2003-04 Soybean Market Outlook Gains in U.S. soybean demand will be harder to sustain in 2003/04 because of a modest outlook for domestic consumption and a continuing surge in South American output There is little incentive to store soybeans very long—if at all—after harvest, as a significant post-harvest rally is unlikely, especially if trend yields or greater are produced in the U.S. The simple reason is that another large crop in South America will be ready to fill the pipeline just a few months after the U.S. soybean harvest finishes—and the trade fully realizes that. Short-term storage of wheat and storing corn into May/June may be more worthwhile than storing soybeans (looking, at the same time, at strategies to protect or lock in price rallies that can slip away in a hurry). Although U.S. planted soybean acreage is down a bit in 2003, lower abandonment should boost harvested acreage slightly over last year. With a trend yield of 39.7 bushels per acre, 2003 U.S. soybean production is forecast by USDA to climb to 2.885 billion bushels. A crop this size would be 6% larger than last year’s and just shy of the 2001 record of 2.891 billion. U.S. soybean exports are forecast slipping to 990 million bushels in 2003/04. So, ending stocks are seen absorbing nearly all of the expected new supply increase, which could climb to 260 million bushels. The larger surplus would pressure the season-average price to a range of $4.35-$5.35 per bushel, compared with $5.50 in 2002/03. World oilseed production is forecast rising to 352.1 million metric tons in 2003/04 from 327.6 million in 2002/03. Nearly half of that increase would be due to a rise in global soybean output from 195.8 million to 207.5 mmt. USDA projects Brazilian soybean production to expand to 56 million tons next season from a revised 2002/03 harvest of 52.5 million. Argentine soybean production is projected escalating to 37 million tons in 2003/04 from a revised old crop of 35.5 million. Larger carryover stocks, domestic oilseeds production, and rapeseed imports will temper China’s 2003/04 soybean imports to 18.5 million tons from 18.2 million in 2002/03, according to USDA. Lower soybean prices should help support a modest 15 million-bushel increase in domestic crush to 1.625 billion bushels. International soybean trade would also benefit from a lower price level, but rising foreign supplies could continue to trim the U.S. market share. The larger U.S. soybean surplus is expected to pressure the season-average price to a range of $4.35-$5.35 per bushel, compared with $5.50 in 2002/03. Producers with a marketing plan should already have about two-thirds of this year’s crop sold, based on price objectives and time deadlines, according to George Flaskerud, NDSU crops economist. While storing soybeans doesn’t appear profitable, don’t be quick to accept low prices either—the $5.00 loan rate provides a price floor. Flaskerud says an LDP is unlikely for soybeans at harvest, but if it’s triggered, take it. Otherwise, use CCC loans to provide cash flow, and consider a 60-day “PCP lock” that can be used to lock in a posted county price for a favorable buy-back price on grain placed under loan. More details on the PCP lock can be found at your local Farm Service Agency office. Brush up on it online as well, at www.smallgrains.org/springwh/MGuide00/pcp/pcp.htm or www.extension.umn.edu/specializations/businessmanagement/Ldp697.pdf . The USDA form for locking in a payment rate can be found online at www.fsa.usda.gov . Click on “price supports,” then “forms,” and then the link at the bottom, “CCC697.” If cash sales are made and you want to speculate on higher soybean prices down the road, consider May call options three strikes out-of-the-money. Don’t anticipate the purchase of a call to be profitable; consider it as insurance in case prices move higher later. Consult with a grain marketing professional about this and other strategies that may help you capitalize on potential post-harvest rallies in the soybean market. Soybean Stocks Up at U.S. and World Levels
Soybean Production in South America
CBT November Soybeans Could Trade Under $5,00 in October
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