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Soybean College - Gary Schnitkey, Ph.D.

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Clara Miles

1) World soybean production is projected to be around 267 million metric tons for the 2012/13 marketing year, driven by high production in South America while U.S. production is uncertain due to drought conditions. 2) Global soybean consumption is also projected to continue growing, reaching over 263 million metric tons in 2012/13, with increasing demand from China and other regions helping absorb supplies. 3) With production uncertainties and strong global demand, soybean prices have remained high, with fall delivery prices over $16 per bushel and futures contracts in 2012/13 also well above projections. Tight world supplies relative to consumption are expected to support firm prices.

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Whats Ahead for Soybean Markets Gary Schnitkey University of Illinois 1
World Soybean Production 300 250 Million Metric Ton 200 ROW 150 US 100 South America 50 0 2 Marketing Year
World Consumption 300 250 200 Million Metric Ton 150 ROW US 100 South America 50 0 Marketing Year 3
World Ending Stocks 4
US Production Year Yield Acres Production Bu/acre Thousand Million bu. 2008 39.7 74,681 2,967 2009 44.0 76,373 3,359 2010 43.5 76,616 3,329 2011 41.5 73,636 3,056 2012 40.5 75,315 3,050 2012 Projected in July, WASDE report Current unknown is yield 5
U.S. Yield 2012 Trend Yield = 43.7 bushels 6
Worst Yielding Years Since 1972 U.S. Soybean Production Year Actual Trend Difference 1988 27.0 33.1 -6.1 2003 33.9 39.7 -5.8 1983 26.2 30.9 -4.7 1974 23.7 26.9 -3.2 1984 28.1 31.3 -3.2 2011 41.5 43.3 -1.8 2012 P 40.5 43.7 -3.2 7
Precipitation at Urbana, IL (inches) Year June July August 2012 2.2 2011 4.2 1.5 1.7 1988 .3 3.6 1.3 Avg 4.1 3.9 3.6 8
Lowest Rainfall Years Since 1910, Urbana, IL July Rainfall August Rainfall Year Inches Year Inches 1916 .5 1953 .7 1930 .5 2008 .8 1914 .6 1937 .8 1933 .6 1961 1.3 1911 .6 1988 1.3 1924 .8 1960 1.3 1940 .9 1986 1.4 9
10
Percent of Normal Rainfall, Last 30 Days, AHPIS 11
Percent of Normal Rainfall, Last 60 Days, AHPIS 12
November 2012 Futures Contract 13
Marketing 2012 Crop Short crops have long tails with early peak, 5 of 8 years before November of year of harvest Darrel Good on Farmdocdaily (www.farmdocdaily.illinois.edu) 14
For RP holders, Consider Hedging Production Nov 2012 contract on 7/25/2012 was at $16.00 per bushel Many hold RP policies at 75% and higher coverage levels Uses higher of projected or harvest price When harvest price is above projected prices, RP makes payments on yield below yield guarantee (TA-APH yield times coverage level) 15
RP and Hedging TA-APH yield = 45 bushels Coverage level = 80% Make payments when yield below 36 bushels (45 bushels x .8) Shortfall at harvest price, when harvest price is above projected price ($12.55) 16
Current prices are not good price Can hedge up to production guarantee 17
Pre-harvest Hedging Good strategy to spread sales, including pre-harvest Hedging losses are occurring on spring hedges Be consistent 18
Projected Production South Year US America ROW Total 2008/09 80.75 93.80 37.82 211.95 2009/10 91.42 130.88 38.76 261.08 2010/11 90.61 132.87 41.22 264.69 2011/12 83.17 110.50 43.20 235.88 2012/13P 83.01 140.80 43.35 267.16 Following shows projections with 37.5 U.S. yield 2012/13P 77.00 140.80 43.35 261.15 19
South American Production (million metric ton) 160 140 120 Million Metric Ton 100 80 60 40 20 0 Marketing Year 20
Soybean Consumption (Million Metric Ton) Marketing South Year U.S. America ROW Total 2007/08 51.63 72.78 178.11 229.74 2008/09 48.11 69.42 173.23 221.34 2009/10 50.67 74.17 187.34 238.01 2010/11 48.39 79.75 202.91 251.31 2011/12 48.35 79.08 205.08 253.42 2012/13P 47.21 84.08 215.93 263.15 21
Soybean Meal Consumption, China, EU China (1,000 Metric Ton) EU-27 (1,000 Metric Ton) 60,000 60,000 50,000 50,000 40,000 40,000 30,000 30,000 20,000 20,000 10,000 10,000 0 0 2007 2008 2009 2010 2011 2012P 2007 2008 2009 2010 2011 2012p
Ending Stocks 23
Soybean Prices Fall Delivery is $16 to $16.25 WASDE for 2012/13 marketing year is at $13 to $15 November 2013 contract at $12.71 24
Summary Short consumption while continuing projected strong demand Lead to strong prices 25

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Soybean College - Gary Schnitkey, Ph.D.

  • 1. Whats Ahead for Soybean Markets Gary Schnitkey University of Illinois 1
  • 2. World Soybean Production 300 250 Million Metric Ton 200 ROW 150 US 100 South America 50 0 2 Marketing Year
  • 3. World Consumption 300 250 200 Million Metric Ton 150 ROW US 100 South America 50 0 Marketing Year 3
  • 5. US Production Year Yield Acres Production Bu/acre Thousand Million bu. 2008 39.7 74,681 2,967 2009 44.0 76,373 3,359 2010 43.5 76,616 3,329 2011 41.5 73,636 3,056 2012 40.5 75,315 3,050 2012 Projected in July, WASDE report Current unknown is yield 5
  • 6. U.S. Yield 2012 Trend Yield = 43.7 bushels 6
  • 7. Worst Yielding Years Since 1972 U.S. Soybean Production Year Actual Trend Difference 1988 27.0 33.1 -6.1 2003 33.9 39.7 -5.8 1983 26.2 30.9 -4.7 1974 23.7 26.9 -3.2 1984 28.1 31.3 -3.2 2011 41.5 43.3 -1.8 2012 P 40.5 43.7 -3.2 7
  • 8. Precipitation at Urbana, IL (inches) Year June July August 2012 2.2 2011 4.2 1.5 1.7 1988 .3 3.6 1.3 Avg 4.1 3.9 3.6 8
  • 9. Lowest Rainfall Years Since 1910, Urbana, IL July Rainfall August Rainfall Year Inches Year Inches 1916 .5 1953 .7 1930 .5 2008 .8 1914 .6 1937 .8 1933 .6 1961 1.3 1911 .6 1988 1.3 1924 .8 1960 1.3 1940 .9 1986 1.4 9
  • 10. 10
  • 11. Percent of Normal Rainfall, Last 30 Days, AHPIS 11
  • 12. Percent of Normal Rainfall, Last 60 Days, AHPIS 12
  • 13. November 2012 Futures Contract 13
  • 14. Marketing 2012 Crop Short crops have long tails with early peak, 5 of 8 years before November of year of harvest Darrel Good on Farmdocdaily (www.farmdocdaily.illinois.edu) 14
  • 15. For RP holders, Consider Hedging Production Nov 2012 contract on 7/25/2012 was at $16.00 per bushel Many hold RP policies at 75% and higher coverage levels Uses higher of projected or harvest price When harvest price is above projected prices, RP makes payments on yield below yield guarantee (TA-APH yield times coverage level) 15
  • 16. RP and Hedging TA-APH yield = 45 bushels Coverage level = 80% Make payments when yield below 36 bushels (45 bushels x .8) Shortfall at harvest price, when harvest price is above projected price ($12.55) 16
  • 17. Current prices are not good price Can hedge up to production guarantee 17
  • 18. Pre-harvest Hedging Good strategy to spread sales, including pre-harvest Hedging losses are occurring on spring hedges Be consistent 18
  • 19. Projected Production South Year US America ROW Total 2008/09 80.75 93.80 37.82 211.95 2009/10 91.42 130.88 38.76 261.08 2010/11 90.61 132.87 41.22 264.69 2011/12 83.17 110.50 43.20 235.88 2012/13P 83.01 140.80 43.35 267.16 Following shows projections with 37.5 U.S. yield 2012/13P 77.00 140.80 43.35 261.15 19
  • 20. South American Production (million metric ton) 160 140 120 Million Metric Ton 100 80 60 40 20 0 Marketing Year 20
  • 21. Soybean Consumption (Million Metric Ton) Marketing South Year U.S. America ROW Total 2007/08 51.63 72.78 178.11 229.74 2008/09 48.11 69.42 173.23 221.34 2009/10 50.67 74.17 187.34 238.01 2010/11 48.39 79.75 202.91 251.31 2011/12 48.35 79.08 205.08 253.42 2012/13P 47.21 84.08 215.93 263.15 21
  • 22. Soybean Meal Consumption, China, EU China (1,000 Metric Ton) EU-27 (1,000 Metric Ton) 60,000 60,000 50,000 50,000 40,000 40,000 30,000 30,000 20,000 20,000 10,000 10,000 0 0 2007 2008 2009 2010 2011 2012P 2007 2008 2009 2010 2011 2012p
  • 24. Soybean Prices Fall Delivery is $16 to $16.25 WASDE for 2012/13 marketing year is at $13 to $15 November 2013 contract at $12.71 24
  • 25. Summary Short consumption while continuing projected strong demand Lead to strong prices 25