USDA Outlook: 2012/2013 U.S. season-average farm price for soybeans forecast at US$12-US$14/bushel, unchanged from previous estimate

Andrew Rogers

WASHINGTON , June 13, 2012 (press release) – The following article is excerpted from the June Oil Crops Outlook published by the Economic Research Service of the USDA.

Macroeconomic Factors Pressure Soybean and Soybean Product Prices

Gloomier economic prospects for Europe, China, and India are reverberating throughout the world. While growth of the U.S. economy is by no means robust, a loss of confidence in these countries precipitated a flight of capital into U.S. Treasury securities. As major foreign currencies have lost value against the U.S. dollar, it has exerted pressure onto nearly all U.S. commodity prices (excluding gold). Of particular note is the value of crude petroleum, which fell 17 percent in May to just over $80 per barrel—a 9-month low. Petroleum is a key price leader for several major agricultural commodities, which are linked by their biofuel markets.

In May, market prices for soybeans and soybean products tumbled due to the aforementioned macroeconomic factors. However, price declines for soybeans and soybean meal may be short- lived because their market fundamentals have not really eased. Export demand for soybeans and soybean meal remains firm and global supplies are tightening every day. There is a full summer ahead for U.S. new-crop soybeans before their yields can be determined. So despite a sharp drop in futures prices, cash soybean prices have resisted the trend and the cash basis is stronger. USDA’s forecast of the 2012/13 average farm price for soybeans is unchanged at $12.00-$14.00 per bushel while the 2011/12 price was forecast down 5 cents this month to $12.30 per bushel.

Similarly, soybean meal price forecasts for 2011/12 (at $360 per short ton) and 2012/13 ($335- $365 per short ton) were also unchanged.

The May average price for soybean oil dropped to 50.7 cents per pound from the April average of nearly 55 cents. However, it may take more time for U.S. soybean oil prices to recover than for soybeans and soybean meal. Current inventories of soybean oil are still ample and the overwhelming impact of the petroleum market may delay any recovery in soybean oil prices. USDA’s forecast of the 2012/13 average price for soybean oil was unchanged at 52.5-56.5 cents per pound, although the 2011/12 price forecast was revised down 2 cents to 51.5 cents per pound to reflect recent circumstances.

Domestic production of soybean oil for 2011/12 is forecast higher this month based on a larger crush rate. The ending stocks forecast is up minimally, however, as domestic use of soybean oil is growing steadily. In particular, demand for soybean oil in biodiesel has rapidly expanded, leading USDA to raise its outlook for total domestic use by 200 million pounds this month to 18.1 billion.

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