Soybeans

Soybean prices, basis Chicago nearest futures contract, had been in a broad trading range since 1999, with support and resistance levels mostly between $4/bu and $5.50. In early calendar 2002 futures were trading near the low end of the range, but strength gradually evolved towards mid-year and gained momentum when the $5.50 resistance area gave way. The subsequent advance carried to $6.25, a near 4-year high, owing to anticipated tight supplies. Prices then retrenched, but still closed the year out at nearly a $1/bu. higher than a year earlier.

World soybean production during 2002/03 reaches a new high; 188.8 million metric tons vs. 184.3 million in 2001/02 and the late 1990's average of less than 160 million tons. Soybeans now account for about 60% of the worlds total oilseed production with cottonseed the nearest closet competitor at a distant 33 million tons. The U.S. produces nearly half of the world's soybeans and Brazil, the second largest producer, about a fifth. Soybean production is expanding in a number of countries, but the U.S. top ranking is well entrenched. A key question focuses on China and Argentina, the latter reaching the third largest producer level during the past few years. In 2002/03 China's record large crop of 16.4 million tons compares with the Argentine's record large 32.5 million and a late 1990's average of about 17 million tons. The odds seem to favor a stronger percentage growth in China than seen in recent years owing to their expanding poultry flocks and the derived demand for high protein soybean meal. However, as China's economy becomes more market sensitive growers may opt to switch to higher price crops with more soybean acreage moved into corn and cotton production; it is possible that China's soybean acreage has peaked at around 9 million hectare, suggesting that further production gains will be dependent on higher average yields, which have yet to be effectively realized, estimated at 1.74 tons per hectare in 2002/03 vs. 1.63 tons in 2001/02. Brazil's soybean crop is sown about the time the U.S. crop has been harvested and was forecast at a record large 49 million tons in 2002/03 vs. 43.5 million in 2001/02. Brazil's bean acreage of 18 million hectare compares with 16.4 million in 2001/02. Argentina's acreage increased to 12.3 million hectare from 11.4 million; average yield in both countries is about the same at 2.60 tons per hectare. However, unlike Brazil, Argentine soybean farmers have significantly lower production costs and a better transportation structure. Brazil's crop year encompasses February to January; Argentina's is April to March.

World soybean trade in 2002/03 of a record large 61 million metric tons compares with the previous high of 55 million in 2001/02. Soybeans account for about 80% of total world oilseed trade. The U.S. is the largest soybean exporter, with about 40% (24.2 million tons) of 2002/03 world exports, but a lower percentage than seen in recent years. Brazil's exports of 20.9 million tons in 2002/03 compare with 15 million in 2001/02 and less than 10 million in the late 1990's. Argentina's exports are forecast at 9.7 million tons in 2002/03 vs. 6 million in 2001/02 and compare with the 1996-99 average of about 3 million. Clearly, the percentage gain in South American soybean exports since the late 1990's greatly exceeds the U.S. Importing nations are more numerous; collectively Asia is the largest importer with almost 28 million tons in 2002/03 with China and Japan accounting for about 19 million tons. The European Union, formerly the largest importing bloc is forecast to import 20.1 million tons in 2002/03, marginally higher than a year earlier. Within the EU, Germany's imports of 4.6 million and the Netherlands 6 million are both about unchanged from 2001/02. The ending 2002/03 world bean carryover was expected to total a larger than expected 29.7 million tons vs. the year earlier 32.4 million; the U.S., Brazil and Argentina account for about 25 million tons of the total vs. 27 million a year earlier.

U.S. farmers harvested a near record large 71.8 million acres of soybeans in 2002 vs. a record 73 million in 2001. The average yield of 37 bushels per acre compares with 39.6 bushels in 2001. Iowa and Illinois are the largest producing states followed by Minnesota and Indiana.

The U.S. soybean crop year begins September 1. Carryover stocks on August 31, 2002 totaled 208 million bushels, down 40 million from a year earlier. Total 2002/02 supplies of 2.9 billion bushels compare with 3.1 billion in 2001/02. Total disappearance in 2002/03 was forecast at 2.7 billion bushels, of which almost 1.7 billion will be crushed, 900 million exported (vs. a record large 1,063 million in 2001/02) and about 165 million allocated to seed and residual. Carryover as of August 31, 2003 is forecast at 175 million bushels, a six year low.

U.S. soybean exports have seen a strong shift in regional demand during the past few years. The traditional European market has come to represent a smaller share of U.S. exports, while Asia and Mexico have increased their importance to U.S. exporters. Asia's share is expected to increase owing to the area's improved economies and the shift away from importing meal and choosing instead to process beans. Historically, When a more positive soybean usage outlook takes hold it's apt to show in early calendar year prices. Demand bull years in soybeans generally show counter-seasonal strength in January and February, however, if total usage holds neutral and/or weakens then prices, manifested chiefly in futures, tend to witness what is referred to as the "February break." If the latter develops its not unusual for prices to penetrate the harvest lows of the "previous October-December quarter. "

The USDA's average price received by farmers in 2001/02 was $4.35 per bushel vs. $4.54 in 2000/01: Early forecasts for the 2002/03 season were $5.05-5.65. The highest farm price during the past decade was $7.35 in 1996/97 and the low was in 2001/02.

Futures Markets

Soybean futures are traded on the Bolsa de Mercadorias & Futuros (BM&F), the Mercado a Termino de Buenos Aires (MAT), the Dalian Commodity Exchange in China, the Tokyo Grain Exchange (TGE), and the Chicago Board of Trade (CBOT). Options are traded on the MAT, the TGE, and the CBOT.

Excerpted from the CRB Commodity Yearbook. For more information on CRB products click here

Soybeans

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