With good weather in South America, Brazil will surpass the U.S. in soybean production during the coming growing season. Since weather has been a major issue for both South and North America during the past year, that qualifier has significance. It will take normal weather in Brazil for the expected production to be reached, which would be nearly 22% above the crop in early 2012. But additional acreage from newly developed land will help with the task. How will that impact U.S. soybean prices and how should that be worked into your marketing plan?

Reports from South America indicate planting progress has been slowed because of dry conditions in central and southern Brazil, as well as too much precipitation in Argentina. And continued rain there will undoubtedly shift some corn acres to soybeans. So how will more Argentine beans and possibly more Brazilian soybeans affect the U.S. soybean market? Iowa State University Economist Steven Johnson contends there are some immediate marketing opportunities and producers should take action to protect their opportunity for higher prices in coming months.

With soybean futures $3 lower than the August highs, many farmers may be reluctant to sell, but looking at soybean futures in deferred contract months, they are lower than nearby contracts. The soybean market has an inverse to it, not a carry, which pays for storage. Johnson says the market wants soybeans now, and is not willing to pay for future delivery, and the last time that happened was in the 2003-2004 marketing year. In that growing season, Johnson says the soybean crop was also short, like 2012, due to weather related problems.

Looking at the charts from that year, Johnson says November futures traded around $8/bu. after a move higher from the $5 range. But at that time, the May futures traded at 50¢ under the November contract. Both then and now, he says the market wants soybeans. Johnson says the lesson learned from 2003-2004 was that prices would rise when the supply was used up, and when May of 2004 arrived, the bean market made a double-top in the $10 range. That was not expected, due to the inverse carry in the market just a few months earlier.