Soybean prices have been trending downward in recent weeks. The November CME Group futures peaked at $14.65/bu. on the last day of August. The same contract traded more than $2 lower on Sept. 26.

The sharp decline, thinks University of Illinois Agricultural Economist Darrel Good, reflects the continuation of poor economic performance and concerns about financial conditions in Europe and the U.S.  He says the financial problems raise serious concerns about commodity demand. However, the 15% decline in soybean prices over the last four weeks may be too much.

The price decline appears particularly large when compared to losses of 8-10% in the livestock and livestock product prices from the highs made earlier this year. “One might expect that demand concerns would result in larger price declines in the livestock sector than in the crop sector.  It may have been that crop prices were pushed too high in August on the basis of crop concerns,”  Good says.

Whether or not soybean prices have moved too low should be known very soon. USDA will release a stocks report this week (Sept. 30, 2011) and a crop production update in mid-October. The last estimate of soybean stocks projected a 225-million-bushel supply on hand at the end of the fiscal year. The fourth quarter stocks report sometimes deviates from the projections. Still, the Illinois economist says it would take a large deviation to substantially alter the supply outlook for the current year.

The bigger supply question is the size of the 2011 soybean crop.  The next forecast will be released Oct. 12. USDA’s September average national yield forecast was 41.8 bu. to the acre, 0.4 bu. above the September forecast.  From 1975 through 2010, the September yield forecast exceeded the August forecast 17 times, as it did this year.  In 10 of those 17 years, the October U.S. average yield forecast exceeded the September forecast.  The increase ranged from 0.1 bu. to 2.3 bu.  In eight of those 10 years, the January yield estimate exceeded the October forecast.

“There is some tendency, then, for a yield increase in September to be followed by further increases”, Good says.  He tempers that thought with the yet to be determined impact of the mid-September frost and freeze in the northern Midwest.