Soybean prices reached record-high levels in late August and early September 2012.  

Those high prices were generated by a combination of a drought-reduced harvest in South America earlier in the year, drought conditions in much of the United States production region, and ongoing strong Chinese demand for soybeans.

Prices declined by about $2 per bushel in September and October as the U.S. crop turned out to be larger than expected, according to University of Illinois agricultural economist Darrel Good.

“For the past four months, March 2013 futures have traded between about $13.50 and $15 and are currently near the mid-point of that range,” Good said. “Prices have received underlying support from the rapid pace of exports and domestic crush, but have experienced wide swings based on changing expectations for the size of the South American crop.

During the same time period, November 2013 futures traded between about $12.60 and $13.60 and are currently at the bottom of that trading range. Recent price weakness in both old- and new-crop futures reflects current expectations that the 2013 South American crop will be record large and will increasingly replace U.S. soybeans in the world market.

“While the pace of U.S. soybean exports remained large through the second week of February, recently announced cancellations of some export sales support the expectation of a rapid decline in that pace in coming weeks,” Good said.

Similarly, the pace of the domestic crush remained large through January, supported by large exports of both oil and meal, Good said. The January crush as estimated by the National Oilseed Processors Association on Feb.15 was not quite as large as expected, and the pace is expected to slow as South American products become available.

Good reported that the 2012-13 marketing year is just approaching the halfway point, so there is still uncertainty about how the tight supplies of U.S. soybeans will be allocated.

Prices will remain sensitive to the revealed pace of consumption and South American production prospects.

If the South American crop is as large as advertised, a slower pace of consumption of U.S. soybeans along with potential to import soybean products later in the year may mean that higher prices will not be required to ration remaining supplies.