Soybean prices react to corn market

By ANDREA JOHNSON, Assistant Editor
Thursday, March 29, 2007 2:11 PM CDT

Soybeans remain the miracle crop - both in terms of variety of uses and in the commodity's ability to maintain good prices.

Despite large supplies, the market has to bid up soybeans to make sure enough acres are planted to the oilseed.

Growers can use the volatility of the market and staying quality of soybeans to obtain favorable soybean prices, according to Ed Usset, University of Minnesota Extension grain marketing economist.

“We have plenty of soybeans, but the market may move higher,” said Usset. “It's all because the market is anticipating all those corn acres. Next year, we go quickly from a massive soybean glut, to a relatively stable balance, to two years out - we don't even want to think about.

“Soybean and corn acres are balancing off each other. These markets are going to zig and zag with each other.”

Chicago Board of Trade soybean futures closed on March 23 with May at $7.69 1/2; July at $7.85; August at $7.94; September at $8, November at $8.13 and November 2008 at $8.37/bushel.

According to the CBOT website, the soybean market moved sideways on March 23 ahead of the March 30 USDA Prospective Plantings report.

Soybean oil sales, as well as energy sales, have moved higher. Soybean meal has been under pressure as South America continues with soybean harvest and begins to sell their crop. Brazil's soybean harvest is forecast at 58.6 million metric tons (2.152 billion bushels) by the Brazil Vegetable Oils Industry Association.

Surprisingly, U.S. soybean export sales for the week ending March 10 were higher than expected. Sales were 523,300 metric tons, or 19 million bushels. Soybean export sales for the 2007 marketing year have reached 62 percent of USDA's forecast, as compared with 68 percent on average for the last five years.

The U.S. Census Bureau indicated that soybean crush in February was 136.9 million bushels - with traders expecting a crush closer to 138 million bushels.

At elevators across the upper Midwest, cash soybeans on March 23 traded at $6.74-7.07/bushel according to the Toolshed Ag Information Network.

At one west central Minnesota elevator regularly followed in this column, cash soybeans on March 23 were worth $6.92 with a basis of 78 cents under. Compared with prices on March 9, the price was 15 cents higher and the basis had narrowed by 5 cents.

In his 2007 pre-harvest marketing plan, Usset sought a minimum price objective of $5.75 November 2007 soybeans.

He recently released his 2008 marketing plan, which calls for a minimum price objective of $6 November 2008 soybeans. To price soybeans more than nine months before harvest, Usset expects to receive a premium of 40 cents in soybeans for 2008. He is also only willing to price 40 percent of the soybean crop in early sales.

“Stuff happens, and I am simply reluctant to commit too much too early,” Usset said. “When we price soybeans, corn or wheat two years out, we are also making commitments to a certain crop rotation, and in a rapidly changing market, these commitments may not make sense a year from now.”

So far, Usset has priced 10,000 bushels of 2008 soybeans at $8.26/bushel November 2008 on March 21.

“These are great pricing opportunities, and if I am lucky, we will look back at each sale six months from now and say, ‘too early and too cheap,'” Usset said. “You want your first sales to be your worst sales. When I am 35 percent sold too cheap, that means I've got a very good price coming for 65 percent of my crop.”

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