With $1 cotton and potentially higher corn prices, it’s not a far reach to predict there will be fewer soybean acres in the United States next year.
“This will be especially true in the Southeast, given the limited yield ability of soybeans,” says Todd Davis, Clemson University Extension economist. Davis presented the soybean market situation and outlook at the recent Southern Region Agricultural Outlook Conference held in Atlanta.
Double-cropping might be a good enterprise for some Southeastern producers, but it also has its drawbacks, he says. “Some of the concerns I’m hearing in South Carolina include to inability to find good wheat seed. There’s also the larger concern of the ability of growers to produce a quality crop. I’ve heard a lot of anecdotes from producers who experienced large quality discounts on wheat this year. That might affect any double-cropping decisions,” says Davis.
The market, he says, is not sending strong signals at the moment to store soybeans.
“But we’re still a little bit early. If we’re back in the position of bidding for acres between corn and soybeans, it won’t last long. It’s too early to prognosticate too seriously because of late August weather and how ponding might affect yields in the Midwest. Also, South America is just gearing up to start its planting season, and that’s going to factor into any bidding between corn and soybeans.
“But there will be fewer acres of soybeans in this next crop year,” says Davis. “Economics should drive futures toward corn in the Midwest. Any acreage bidding between corn and soybeans will be more about the market being concerned about protecting soybeans so we don’t empty all of the grain bins.”
According to the October USDA report, the 2010 U.S. soybean crop is now forecast at 3.408 billion bushels, 75 million smaller than the September forecast, but 49 million larger than the 2009 crop. The lower forecast reflected a reduction of 1.163 million bushels in the estimate of harvested acreage and a 0.3 bushel reduction in the yield forecast. At 44.4 bushels, the 2010 average U.S. yield is still expected to be record large. The November 2010 soybean futures contract traded to a high of $11.89 on Oct. 11.
Looking at how the 2010 soybean production season began, Davis says producers were “chomping at the bit” to plant soybeans this year.
Early weather cooperated
“Weather cooperated, and the early part of the season, producers were running about a week ahead of average, with planting progress getting closer to average during the latter part of the planting season. This was in stark contrast to 2009, when we had a late crop, with both planting and harvesting strung out over a long period of time,” he says.
This past April, moisture conditions were looking good, even in the South, says Davis. “If you get the beans planted early, and get moisture and warm weather, you can get the crop emerged. We had soybeans emerging about a week before the five-year average. Again, this was in stark contrast to the 2009 crop,” he says.
At about mid-May, in Iowa, the decision is made that if you haven’t already planted corn, you usually switch to soybeans, due to yield potential, says Davis.
As soybeans began blooming, the crop was still running about a week ahead of the average, he says. As harvest began, crop progress had returned to the average.
In the September USDA report, about 13 percent of the U.S. soybean crop was in the very poor to poor category, 24 percent was fair, 46 percent was good and 17 percent was excellent.
Looking at trends in planted acreage for U.S. soybeans, an increase was seen in 1996 when the farm bill at that time lifted planting restrictions. A large increase was noted in 2006 when many agricultural economists were saying the relative profitability of soybeans was better than that for corn, says Davis. Then, in 2007, soybeans began giving up acres to corn because of ethanol.
“Since then, we’ve been ramping up soybean acreage,” he says. “We’re looking at 78.9 million acres planted this year and 77.9 million acres harvested.”
In the Midwest, producers in Illinois and Indiana decreased acreage slightly and Iowa increased its soybean acres by about 7 percent. Altogether, Midwestern states planted about 3 percent more soybeans this year than in 2009.
Production will be up in the Midwest this year, making up about 85 percent of total U.S. production, says Davis.
In terms of relative profitability, soybeans have not been faring as well in the South, he says, and yields have taken a hit this year due to heat and drought. Production is expected to be down by about 13 percent from last year.
“The issue is our relative supply. We are a protein/meal deficit region anyway, and this will just exacerbate that issue.”
Yields steadily increasing
Soybean yields have been steadily increasing through technology, says Davis. While the USDA has revised its yield projection downward, it still will be record-large for 2010. An increased carry-forward from this past year added to a potentially record crop for this year could result in the second largest total supply on record.
Exports, he says, have been the “savior” for the U.S. soybean market. “Last year, we had record exports at 1.495 billion bushels. Currently, USDA is projecting the second largest export amount at 1.485 billion bushels. That’s good because crush is being reduced. There are fewer heads of hogs to feed, though there might be an increase in broilers. In general, they’re looking at crushing the smallest amount since the 2003-04 marketing year.”
Soybean exports, says Davis, have been steadily improving. Two-thousand and nine was a tremendous year. We started out strong and benefited from production problems in South America — they’re our biggest export competitor. It’s really early in the marketing year, so it’s difficult to make any strong statements about where we are compared with last year. We are somewhat slightly ahead of last year. In mid-September of last year, we had exported 19.8 million bushels. This year, we’ve exported 22 million bushels.”
Price trends show that in 2006-07, the marketing average price for U.S. soybeans was $6.43 per bushel. “Then, we had a large reduction in acreage and corn was that rising tide that lifted a lot of boats, on the row-crop side.”
The crop price has worked its way down from $10.10 per bushel, and USDA’s current estimate of average price for the 2010-11 marketing year is $9.15 to $10.65 per bushel. Uncertainty, says Davis, is still reigning in the soybean market.
In the mid to late-1990s, he says, the U.S. was drawing down stocks-to-use but the price wouldn’t budge. In 1995, Roundup Ready technology and no-till production systems arrived on the scene in South America, and Argentina and Brazil doubled their soybean acres.
“A lot of pastureland in Argentina and Brazil was converted to row crops due to economics. Soybeans were so much more profitable. Argentina went from producing 459 million bushels of soybeans to a little over two billion bushels, and Brazil went from 808 million bushels to 2.3 billion bushels.”
A lot of their production, he says, came from acreage that decimated their fed cattle sector.
On a world basis, says Davis, ending stocks are actually projected to be building through the end of the current marketing year. “Stocks are building in the U.S. and drawing down slightly in Argentina, Brazil and China.”