Soybean Mountain Looming Ahead
September 2000
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Soybean Mountain Looming Ahead September 2000 |
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Soybean Mountain MANHATTAN, Kan. -- The soybean surplus could add another 66 percent to the U.S. mountain by the close of the 2000-01 marketing year, according to Kansas State University economist Bill Tierney. Late summer may bring insect, disease or weather problems. But, those are about the only things that could halt or reverse a price slide that’s aimed straight for harvest time ... and perhaps beyond, he said. Thus far, the crop itself is climbing toward a big year-to-year rise in production. Weekly crop reports indicate national average yields may be over 42 bushels an acre. Harvested acreage could be up by 1.4 million acres, said Tierney, the grain marketing specialist for K-State Research and Extension. "As August began, 85 percent of U.S. soybeans were in bloom. The long-term average for that is 75 percent," he said. "More than 50 percent were podding, up from the typical 39 percent." Tierney analyzes the U.S. Department of Agriculture’s weekly reports on crop progress and condition. He calls the result a "condition index score." In early August, the score for the coming harvest’s soybeans was still rising. At 370, it was 15 points better than both the long-term average and 1999's index for the date. Demand potential is harder to pin down, he said. Before a marketing year starts, usage forecasts are mostly a best guess -- much like estimating the number of jellybeans piled in a sealed gallon jar. Even so, USDA’s early estimates suggested domestic use and exports both will increase. Two factors were driving this domestic outlook – a near-record number of U.S. protein-consuming animals and lower feed costs, which tend to encourage greater feed use. "What industry watchers are predicting, however, is that livestock-on-feed numbers will decline in 2000-01 for the first time in more than 13 years," he said. "That makes the response to lower feed costs less certain -- particularly since the numbers slated for decline are in the hog, beef cattle and dairy sectors." Export sales figures for the crop now growing in the field were the sixth lowest on record in July. At 35 million bushels, they were 8 million bushels below 1999's July bookings. They also accounted for just 4 percent of USDA’s then-current forecast for the entire 2000-01 marketing year. "Typically, that month’s exports account for 10 percent of the annual total," Tierney said. Old-crop soybean bookings are ending the 1999-2000 marketing year on a record high. USDA’s early projections for the year were evidently about 35 million bushels too low, he said."And, that kind of unexpected development always remains a possibility," Tierney added. "The fact is, though, USDA predicted 2000-01 exports would beat the new record. That alone could take some doing." New-crop soymeal sales in July were ahead of last year’s pace. But, those bookings added up to 230,000 tons, while the 25-year average for the month is 329,000 tons. "You could rate July’s new-crop soyoil exports as negligible. That’s neither worrisome nor even unusual three months before the beginning of the marketing year," he said. U.S. soybean prices tend to bottom out in October. Tierney sees fair odds for soybean futures’ setting their annual price low then, falling to $4 a bushel. "Soybean prices already are below the government’s marketing loan rate. So, that kind of increased income risk won’t affect most farmers," he said. "Nonetheless, farmers who are aggressive marketers will need to be cautious, and they should start today. Trying to hedge their crop or loan deficiency payment will be highly risky. "Buying options on soybean futures contracts is relatively cheap now simply because futures’ prices have fallen below the loan. We’ve got lots of ‘beans growing out there." Tierney’s current analyses suggest the national average price for 2000-01 soybeans will be $4.50 a bushel. Even so, year-end supplies could increase from 290 million to 495 million bushels. |