While much of the attention in the crop markets has been focused on wheat and corn, soybean prices have shown strength even while trading in a wide range during the past 2 months.
University of Illinois economist Darrel Good says that fundamental developments have been less dramatic with soybeans than in the wheat and corn markets. Over the next month, he says three USDA reports will add more clarity to the supply side of the soybean market.
September 10 Crop Production Report
A change in the forecast of 2010 harvested acreage is not expected, so the focus will be on the yield forecast, Good says. The USDA’s August Crop Production report forecast the U.S. average yield at 44 bushels, equal to last year’s record and about 1.2 bushels above the calculated trend yield for 2010.
"Above-average temperatures in many areas during August may have reduced yield potential, particularly in areas that also experienced below average precipitation during the month," Good says. "For the most part, expectations are that the U.S. average yield potential has not been reduced enough to alter the prospects for a record-large harvest."
September 30 Grain Stocks Report
This report will reveal the level of old crop soybean stocks on Sept. 1, the beginning of the 2010-11 marketing year.
Based on available data, it appears that soybean exports during the 2009-10 marketing year that ended on Aug. 31 exceeded the USDA projection of 1.47 billion bushels, Good says. Cumulative export inspections through Aug. 31 were reported at 1.46 billion bushels.
"From Sept. 2009 through June 2010, cumulative exports as estimated by the Census Bureau exceeded inspections by 44 million bushels," Good says. "If that margin continued through August, marketing year exports would have totaled 1.504 billion bushels."
In contrast, Good says the 2009-10 marketing year domestic crush may fall just short of the USDA projection of 1.75 billion bushels. The crush during August needed to be 7 million bushels larger than during Aug. 2009 to reach that projection. Monthly crush was below year-ago levels from April through June and exceeded the year-ago crush in July by only 300,000 bushels.
"On the surface, it appears that the inventory of soybeans on Sept. 1 may have been smaller than the projection of 160 million bushels," Good says. "However, the September stocks report has a reputation for containing some surprises and, on occasion, has resulted in a revision in the estimated size of the previous harvest."
USDA's October 8 Crop Production Report
In addition to providing a new forecast of yields, this report will also reflect administrative acreage information, primarily certified planted acreage data from the Farm Service Agency.
Prospects for export demand for the 2010 U.S. crop will depend heavily on the strength of Chinese demand and the size of the 2011 South American crop, Good says. Currently, the USDA projects that China will import 1.91 billion bushels from all sources during the 2010-11 marketing year, up from 1.82 billion during the year just ended.
While the 2011 South American crop is expected to be smaller than the huge 2010 crop, Good says large inventories of the 2010 crop will keep supplies large and perhaps allow South America to capture more of the Chinese market. However, U.S. export sales for the 2010-11 marketing year have started very strong.
As of August 26, Good says the USDA reported sales for delivery during the current marketing year at 562.7 million bushels. New crop sales a year ago totaled 516.1 million bushels.
"Nearly 60% of current outstanding sales are to China," Good says. "Progress of the South American crop will become very important over the next few months as the developing LaNina weather pattern becomes important for the Southern Hemisphere."
Soybean futures prices remain above $10, resulting in cash prices at or above the upper end of the USDA’s projected range for the marketing-year average price.
"Relatively high prices and a small carry in the futures market make harvest sales attractive for a portion of the crop," Good adds.