November 2014 soybean futures closed at about $12.66 per bushel Friday after good rallies mid-week. But if the crop progresses smoothly into late summer and fall, new-crop soybean cash prices could tumble down to near $10, and could drop to $8.50, said Dan O’Brien, Kansas State University Extension grain economist.
In analyzing the most recent K-State AgManager Soybean Market Outlook report, O’Brien told Corn+Soybean Digest that growers should consider locking in a portion of their expected production. “We’re in the time period for crop determination,” he said. “It’s time to be really watchful for how the soybean crop gets planted, the moisture situation we’re seeing and how that impacts new-crop prices.
“If the crop gets underway and people are less worried about 2014 production, pricing opportunities could be at risk as we move from spring into early-mid summer.”
While USDA has projected 2014-2015 soybean prices to average $10.75, based on ending stocks this year of 330 million bushels, O’Brien said strong U.S. production and weak exports could cause ending stocks to bulge to near 447 million bushels.
“That would be a 13% or more stocks-to-use ratio for the 2014-2015 marketing year,” he said, “compared to USDA’s projection of stocks-to-use at 9.57%, and 3.8% for the current 2013-2014 marketing year. A ratio of 13% could push 2014 soybean prices sharply lower – down to between $8 and $9, or an average of about $8.50.”
On Thursday, soybean futures prices increased by up to 19 cents. Bryce Knorr, Farm Futures senior editor, said the surge in prices came after USDA reported 6 million bushels of additional old-crop sales, at a time when both shippers and processors face the prospect of very tight supplies this summer.
“Already all but 35 million bushels of USDA's forecast for the year have been shipped, increasing potential for a squeeze,” Knorr said.
He added that the price ratio of new-crop soybeans to corn “hit a very strong 2.69 to 1 Thursday, encouraging growers facing problems with wheat and corn planting to switch to soybeans, with more double-crop acres also in play.
“Expect futures to remain volatile as the market sorts out very tight old-crop supplies. Big yields could ultimately sink the market later in the growing season, an incentive to keep pricing new crop at profitable levels, with mid-May sales good most years.”
Focus on getting 50% of new crop priced, he said, noting that “farmers who bought Revenue Protection on 85% of trend adjusted yield and sign up for Agriculture Risk Coverage should have a good safety net for 2014.”