Watch For Strong Pricing Opportunities

05-14SScvr This month, Dr. Kurt Guidry, LSU AgCenter Agricultural Economics and Agribusiness, shares his thoughts about the soybean market. Following are Guidry’s comments from the “Market Situation and Update” April 1 report:

Dr. Kurt Guidry: As with the corn market, strong demand to this point in the 2013/14 marketing year continues to improve the supply and demand outlook. While soybean stocks on March 1 were slightly higher than most trade guesses, implied use suggests that USDA’s current projections for total use for the 2013/14 marketing year may be too low. Using implied use statistics from the quarterly grain stocks report suggests that total soybean use for the 2013/14 marketing year could be significantly higher than USDA’s current projections. While soybean demand is expected to weaken over the last few months of the marketing year as more of the record South American crop becomes available, there have been no signs of a significant rationing of tight supplies here in the United States. Export shipments of soybeans are currently running nearly 23 percent ahead of last year’s pace.

As of March 20, 2014, total soybean commitments (accumulated shipments plus outstanding sales) were at 106 percent of the total exports expected for the entire 2013/14 marketing year. With five months still remaining in the marketing year, there is good potential that the USDA will be forced to increase its expectations for exports and could continue to whittle away at an already low stocks levels. And while domestic crush expectations have been tempered slightly as crush margins tighten, margins are still significant enough to keep crush demand at favorable levels. While the remainder of the 2013/14 marketing year continues to look favorable, the real concerns for this market are for the 2014 crop and 2014 marketing year. Expectations for soybean acres to climb to over 81 million acres in 2014 along with the full impact of a record South American crop being felt by the market are two issues that create uncertainty regarding prices moving forward.

Earlier in the year, I projected a price range for the 2014 crop at $11.00 to $12.50 per bushel. With new crop futures prices currently around the $12.00 level, it would appear the short-term optimism of strong demand has outweighed the long-term concerns of growing domestic and world supplies. New crop futures over the next month or so would seem to have enough momentum to challenge the mid $12.00- per-bushel range. Any move to that level or above would be considered strong pricing opportunities.

With the potential of a record U.S. crop with normal yields in 2014 following a record South American crop, it is difficult to project prices being able to sustain a move much higher than the upper end of my original price projection. We only have to look back at the end of 2013 to see the type of pressure that a large U.S. crop can place on prices. Before the latest price improvement, new crop futures were struggling to remain above $11.00 per bushel.

Soybean South would like to thank Dr. Guidry for contributing this soybean market update.

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