According to University of Illinois agricultural economist Darrel Good, U.S. soybean market fundamentals have been strong for an extended period of time.

“The strong fundamental factors have included record large exports in 2009-10 and 2010-11 as Chinese demand expanded, a reduction in U.S. soybean acreage in 2011, a relatively low U.S. average yield in 2011, intentions to reduce U.S. acreage again in 2012, and a very small soybean harvest in South America this year,” Good said.

“These strong market fundamentals continue in the form of a rapid pace of consumption and concerns about the size of the 2012 U.S. crop.”

Good reported that soybean prices began moving higher in July 2010, starting from about $9.50. July 2012 soybean futures reached a high of about $14.70 in late August 2011, declined to a low near $11.25 in mid-December 2011, and reached a high of $15.12 in early May 2012.  

Prices have been very choppy the past two months, but the July futures contract is now trading within about.30 cents of the early May high. November 2012 futures prices have been lower than July futures but have followed a similar pattern and are now trading at a contract high near $14.30.

“The pace of the domestic soybean crush started slowly this year,” Good said. “The National Oilseed Processors Association reported that its members crushed 7.7 percent fewer soybeans in the first quarter of the 2011-12 marketing year than in the same quarter the previous year.  Crush during the second quarter, however, was 2.3 percent larger and crush during the third quarter was 7.2 percent larger than in the respective quarters last year.  

“Crush during the first three quarters of the year was 0.3 percent larger than the crush last year. For the year, the USDA projects the crush to be 0.7 percent larger than during the 2010-11 marketing year.