Soybean price ranges seen sharply below a year ago

by Jay Sjerven
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KANSAS CITY — Prices of soybeans and soybean products collapsed from all-time highs set in July on a larger U.S. crop confronting decreased domestic and export demand, record oilseed and palm oil production abroad and a slumping world economy. The plunge in crude oil futures prices from around $148 a barrel to just above $40 a barrel was a prominent outside influence on the soy complex as soybean oil is used in the manufacture of biodiesel. Prices of soybeans and soybean products in 2009 weren’t expected to veer dramatically from current ranges, according to most market analysts.

Soy complex futures prices set all-time highs in early July. Since then, soybean futures prices dropped from around $16.50 a bu to around $8.56 a bu in mid-December, a decline of 48%. Soybean meal futures prices dropped 41%, to around $257 a ton from $434, and soybean oil future prices plunged 55%, to around 31.25c a lb from around 69.75c.

Paul Meyers, vice-president, commodity analysis, Connell Purchasing Services, Berkley Heights, N.J., pointing to adequate supplies and decreasing demand forecast soybean futures prices to range mostly between $7.75 and $9 a bu in the next few months and soybean oil futures prices to range mostly between 29c and 32c a lb. Matt Beeson, Beeson & Associates, Crestwood, Ky., suggested a similar market tone but wider trading ranges with soybean futures prices trading mostly between $7 and $9 a bu and soybean oil futures prices trading between 27c and 35c a lb.

Mr. Beeson said soybean oil price changes in the past several months were 90% correlated with changes in the crude oil market because of soybean oil usage in meeting the mandate for biodiesel production. If there is no rally in crude oil prices, there will be no rally in soybean oil prices, Mr. Beeson said.

U.S. soybean supply was expected to remain relatively stable in 2008-09 despite a larger crop because of the small carryover supply on Sept. 1, 2008, at 205 million bus. The U.S. Department of Agriculture on Dec. 11 projected the 2009 soybean carryover at 205 million bus, the same as in 2008 and compared with 574 million bus in 2007. The 2008 crop was 2,921 million bus, up 9% from 2007.

Meanwhile, global production records were forecast for oilseeds, protein meals and vegetable oils, which should keep the pressure on pricing through 2008-09.

Factors affecting the decrease in soybean oil usage in food included an economy-related fall in consumer visits of restaurants and the ongoing shift to vegetable oils with no trans fatty acids, said Vince Schwartz, a broker with Frances-Mustoe & Co., Brea, Calif. Mr. Schwartz pointed to the impending ban on trans fats in foods served in California restaurants and similar measures in other parts of the country as accelerating the shift.

In contrast to soybean oil, no trans oils were experiencing an expansion in demand. The U.S.D.A. noted in its most recent Oil Crops Outlook that U.S. imports of canola oil were expected to reach 2.55 billion lbs in 2008-09, up 14% from the previous year and twice as high as they were just four or five years ago. Meanwhile, U.S. palm oil consumption in 2008-09 was projected at 1,065,000 tonnes, up 14% from 936,000 tonnes in 2007-08 and compared with 661,000 tonnes in 2006-07, 565,000 tonnes in 2005-06 and 327,000 tonnes in 2004-05.

The market’s attention increasingly was directed to prospective spring plantings in the U.S. Forecasts issued by Informa Economics on Dec. 12 surprised the trade. Informa projected soybean plantings at 81.5 million acres and corn plantings at 82.3 million acres. Most market participants expected corn acres to approach 90 million and soybean acres to fall below this year’s 75.9 million.

Both Mr. Meyers and Mr. Beeson remarked the Informa forecasts were based on a recent survey that reflected producers’ current concerns about costs of fertilizers and other inputs, and both analysts expected farmer attitudes to shift back in favor of corn close to planting time as input costs should decline.

Mr. Meyers said he expected 75 million acres to be planted to soybeans, down nearly 1 million acres from 2008.

"Even with a million less acres, if we get trend yields, we should produce 200 million bus more soybeans in 2009 than we did this year," he said.

Mr. Beeson pointed out the ethanol mandate required corn plantings approaching 90 million acres, and in the several weeks before planting decisions are finalized, the markets should reflect that need with corn prices gaining on soybean prices.

This article can also be found in the digital edition of Food Business News, December 23, 2008, starting on Page 29. Click here to search that archive.

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