Soybean Market Situation
And Outlook
2008 Southern Ag. Outlook Conference
Atlanta, Georgia
September 24, 2008
Kurt M. Guidry
Professor
Department of Agricultural Economics
Current Issues
 Despite Increased Production, Stocks Expected To Remain Tight
 Weaker US Dollar Has Supported Export Demand Despite Higher Prices
 While Lower, World Stocks Still At Comfortable Levels
 Speculative (Non-Commercial ) Activity Continue To Help Shape Market
 Historically High Prices Persist (Basis Levels Remain Weak)
 Prices Remain Volatile, Downward to Sideways Trend To Harvest
 Longer Term Prices Likely Shaped By Crop Acreage
Fundamental Supply and Demand
Conditions
U.S. Soybean Supply and Demand
5 Year
2007/08
2008/09
Average
Sept. 2008
Sept. 2008
5 Year Avg.
Last Year
Last Month
Planted
72.0
63.6
74.8
3.95%
17.61%
0.00%
Harvested
71.0
62.8
73.3
3.21%
16.72%
0.00%
Yield
40.6
41.2
40.0
-1.48%
-2.91%
-1.23%
Begin Stocks
314
574
140
-55.40%
-75.61%
3.70%
Production
2,883
2,585
2,934
1.78%
13.50%
-1.31%
Total Supply
3,203
3,169
3,084
-3.73%
-2.68%
-1.03%
Crush
1,717
1,815
1,785
3.95%
-1.65%
-1.65%
Exports
1,041
1,155
1,000
-3.91%
-13.42%
0.00%
Demand
2,897
3,029
2,949
1.78%
-2.64%
-1.04%
306
140
135
-55.92%
-3.57%
0.00%
10.39%
4.62%
4.58%
-55.93%
-0.96%
1.05%
$7.06
$10.15
$12.35
74.83%
21.67%
0.82%
End Stocks
S-T-U
Price
---------- Percent Change ----------
Source: USDA, World Agricultural Supply and Demand Estimates, September 2008
Stock Situation Remains Positive
And
Points To Continued Strong Prices
Soybean Prices and Stocks-To-Use (1980 - 2008)
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
y = -13.32x + 7.9372
$2.00
$0.00
0.00%
2
R = 0.1998
5.00%
10.00%
Series1
15.00%
Linear (Series1)
20.00%
25.00%
30.00%
Soybean Prices and Stocks-To-Use (2005 - 2008)
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
y = -39.581x + 12.952
R2 = 0.8525
$2.00
$0.00
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00%
Series1
Linear (Series1)
Despite Increased Production in 2008,
Solid Export Demand Due To Weaker
Dollar and Strong Domestic Crush
Expected to Keep Stocks Tight
U.S. Currency Exchange Rate – Selected Countries
Brazil
Japan
Have We Seen the End to Falling Dollar ?
China
Source: St. Louis Federal Reserve
Mexico
U.S. Soybean Exports
1,200,000,000
1,000,000,000
Bushels
800,000,000
600,000,000
400,000,000
200,000,000
Week
08/09 Exports Down 32% From 07/08
Source: USDA, Foreign Agricultural Service
5 Year Average
2007/08
2008/09
52
49
46
43
40
37
34
31
28
25
22
19
16
13
10
7
4
1
0
Sharp Increases in Biodiesel Production Providing Support For Soybean Oil
Source: National Biodiesel Board: http://www.biodiesel.org
US Soybean Crush
170,000
160,000
1,000 Bushels
150,000
140,000
130,000
120,000
110,000
100,000
90,000
r
h
04 b e
/
rc
3
a
0
em M
20 ec
D
ne
u
J
r
h
05 b e
/
rc
4
a
0
em M
20 ec
D
ne
u
J
r
h
06 b e
/
rc
5
a
0
em M
20 ec
D
Month
Source: USDA, Economic Research Service
ne
u
J
r
h
07 b e
/
rc
6
a
0
em M
20 ec
D
ne
u
J
r
h
08 b e
/
rc
7
a
0
em M
20 ec
D
ne
u
J
World Supply and Demand
 Increases in US and South America Production Expected to Bring
Increases In World Stocks
 While Stocks Are Down From High Two Years Ago, Still Above
Long Term Average
 While Prices Remain Strong, Fundamentally, World Supply and
Demand Situation Still Comfortable
World Soybean Supply and Demand
250,000
70,000
60,000
200,000
150,000
40,000
30,000
100,000
20,000
50,000
10,000
0
0
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
Marketing Year
Total Production
Source: USDA, Foreign Agricultural Service
Total Consumption
Ending Stocks
2008/09
1,000 Metric Tons
1,000 Metric Tons
50,000
Soybean Production, Selected Countries
90,000
1,000 Metric Tons
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Marketing Year
Argentina
Source: USDA, Foreign Agricultural Service
Brazil
United States
Soybean Exports, Selected Countries
35,000
1,000 Metric Tons
30,000
25,000
20,000
15,000
10,000
5,000
0
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Marketing Year
Argentina
Source: USDA, Foreign Agricultural Service
Brazil
United States
China’s Activity In Soybean Market
Is Large Factor In US Export Performance
China Soybean Purchases
40,000
1,000 Metric Tons
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Marketing Year
China Imports
Source: USDA, Foreign Agricultural Service
China Imports From US
Short Term Price Movement
Likely Determined By Progression of
Crop to Harvest
(And Speculative Activity)
Source: DTN AgDayta
Source: DTN AgDayta
Without Weather Concerns, Expect
Sideways To Downward Trending
Market To Harvest
Speculative Activity And Spillover
Influences From Outside Markets
Could Alter Trend
Month
Source: USDA, National Agricultural Statistics Service
5/14/2008
1/14/2008
9/14/2007
5/14/2007
1/14/2007
9/14/2006
5/14/2006
1/14/2006
9/14/2005
5/14/2005
1/14/2005
9/14/2004
5/14/2004
1/14/2004
9/14/2003
5/14/2003
1/14/2003
9/14/2002
5/14/2002
1/14/2002
Dollars Per Bushel
U.S. Soybean Prices
14
12
10
8
2002-07 Avg
6
4
2
0
nM 02
ay
Se 02
p0
Ja 2
nM 03
ay
Se 03
p0
Ja 3
nM 04
ay
Se 04
p0
Ja 4
nM 05
ay
Se 05
p0
Ja 5
nM 06
ay
Se 06
p0
Ja 6
nM 07
ay
Se 07
p0
Ja 7
nM 08
ay
Se 08
p08
Ja
Dollars Per Ton
U.S. Soybean Meal Price, Central Illinois
450
400
350
300
250
200
150
100
50
0
Month
Source: USDA, Agricultural Marketing Service
nM 02
ay
Se 02
p0
Ja 2
nM 03
ay
Se 03
p0
Ja 3
nM 04
ay
Se 04
p0
Ja 4
nM 05
ay
Se 05
p0
Ja 5
nM 06
ay
Se 06
p0
Ja 6
nM 07
ay
Se 07
p0
Ja 7
nM 08
ay
Se 08
p08
Ja
Dollars Per Hundredweight
U.S. Soybean Oil Price, Central Illinois
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
Month
Source: USDA, Agricultural Marketing Service
Soybean Futures Contract Prices – September 22, 2008
Source: DTN AgDayta
Soybean Futures Prices – Long Term Trend
Source: DTN AgDayta
Soybean Futures Prices – Seasonal Index
Source: DTN AgDayta
Soybean Futures Contracts – Commitment of Traders
Reduction in Speculative
Position Has Helped Soften
Market – Is A Reversal In This
Trend Going To Happen As A Result
Of Outside Market Influence?
Source: DTN AgDayta
Basis Levels Remain Historically Weak:
Departure of Futures From Fundamentals
And
Increased Transportation Costs
Source: USDA, Agricultural Marketing Service
Longer Price Trend:
Will We See Another Battle For
2009 Acres?
Tight Stock Situation For Both Corn
And Soybeans Suggest Both Markets
Will Look To Attract Additional
Acres in 2009
Soybean Price Needed For Equal Returns Above Variable Costs With $4.00 Corn
----------------------------- Soybean Variable Cost Per Acre ----------------------------Corn Variable $/Ac
$140
$150
$160
$170
$180
$190
$200
$ 350
$9.57
$9.81
$10.05
$10.29
$10.52
$10.76
$11.00
$ 400
$8.38
$8.62
$8.86
$9.10
$9.33
$9.57
$9.81
$ 450
$7.19
$7.43
$7.67
$7.90
$8.14
$8.38
$8.62
$ 500
$6.00
$6.24
$6.48
$6.71
$6.95
$7.19
$7.43
Soybean Price Needed For Equal Returns Above Variable Costs With $5.00 Corn
----------------------------- Soybean Variable Cost Per Acre ----------------------------Corn Variable $/Ac
$140
$150
$160
$170
$180
$190
$200
$ 350
$13.21
$13.45
$13.69
$13.93
$14.17
$14.40
$14.64
$ 400
$12.02
$12.26
$12.50
$12.74
$12.98
$13.21
$13.45
$ 450
$10.83
$11.07
$11.31
$11.55
$11.79
$12.02
$12.26
$ 500
$9.64
$9.88
$10.12
$10.36
$10.60
$10.83
$11.07
Soybean Price Needed For Equal Returns Above Variable Costs With $6.00 Corn
----------------------------- Soybean Variable Cost Per Acre ----------------------------Corn Variable $/Ac
$140
$150
$160
$170
$180
$190
$200
$ 350
$16.86
$17.10
$17.33
$17.57
$17.81
$18.05
$18.29
$ 400
$15.67
$15.90
$16.14
$16.38
$16.62
$16.86
$17.10
$ 450
$14.48
$14.71
$14.95
$15.19
$15.43
$15.67
$15.90
$ 500
$13.29
$13.52
$13.76
$14.00
$14.24
$14.48
$14.71
Current Futures : Dec 09 Corn @ $5.96, Nov 09 Soybean @ $11.95
At Current Prices For 2009,
Would Seem To Favor Corn At
Average Yields
Will Soybean Prices Have To Increase
Relative To Corn Prices To
Maintain Acres ?
Summary
 Historically Strong Prices
 Fundamentally, Would Expect Prices To Trend Slightly Down or
Sideways Into Harvest and Then Improve As Battle For 2009
Acres Begin
 Tight Stocks Will Keep Market Volatile
 Increased Volatility = Increased Marketing Costs and Perhaps
Limited Marketing Alternatives
 Fundamentally, World Stocks Still Comfortable – Will That
Limit Upside Potential ?