Last year marked the fifth consecutive record for U.S. soybean exports, and 2012 could topple that record again – if all the right economic conditions align, says Darrel Good, University of Illinois agricultural economist.
“Both the 2009-2010 marketing year and the 2010-2011 marketing year posted record soybean exports that totaled close to 1.5 billion bushels – with last year’s total being slightly higher,” says Good. “Currently, USDA’s whole soybean export forecast for 2011-2012 is only 1.27 billion bushels, but that could change due to the uncertainty surrounding the South America crop.”
One year ago, South America had an extremely large soybean harvest that captured significant market share that could have gone to the U.S., notes Good. However, a repeat of that scenario is debatable right now, he adds.
“The South America crop is the complicating factor, and that crop is still in question,” he says. “Their harvest peaks in March and the size of that crop will influence both the current marketing year and spill over into the next marketing year.”
For now, soybean markets can be characterized by slightly weaker demand, more abundant supplies and somewhat weaker price prospects than in mid-2011, says Good. In addition to several months of strong competition from South America, there’s also been some slowdown in the demand growth from China, he points out.
“The $13-14/bu. soybean prices that we saw last summer will be difficult to attain this summer,” says Good. “Yet, there’s also a large amount of uncertainty over global production and a lot of price movement is still possible.”
Production uncertainty isn’t limited to South America alone. “Many analysts are predicting that the U.S. could have a big crop in 2012, but at this point, we’re still a long way from harvest,” says Good. “A lot could still happen before then.”
For 2012, U.S. farmers should pay careful attention to prices in February, which the USDA uses to establish the soybean price for revenue insurance purposes, advises Good. Given the potential revenue protection that the insurance might afford farmers in 2012, this year might be an opportune time to make use of it, he adds.
“Right now, November futures are at $12.05/bu.,” he points out. “If that price is maintained through February, it will give farmers a very attractive revenue floor for those who want to buy revenue insurance products.”
Good notes that another potential boost for soybean demand and profits in 2012 is the increase in soybean oil targeted for biodiesel under government Renewable Fuels Standard mandates. “USDA numbers show the industry used 2.55 billion pounds of soybean oil for biofuel last year,” says Good. “This year, USDA is projecting that statistic to grow to 3.6 billion pounds.”
Although this projected growth in soybean oil for biofuels should help soften a potential decline in U.S. soybean exports, it won’t reduce the decline completely, he adds. The biggest factors for increased U.S. soybean exports still hinge on South America production and global demand.