Ticker: S
Exchange: CBOT
Trading Hours: Regular Hours: 10:30 - 2:15 EST.
Electronic: 9:30p.m. - 7:00 a.m. EST
Contract Size: 5,000 Bushels
Contract Months: Sep, Nov, Jan, Mar, May, Jul, Aug
Price Quote: Cents and Quarters per cent/bu.
Tick Size: cent/bu. ($12.50/contract)
Last Trading Day: The business day prior to the
15th calendar day of the contract month
Daily Price Limit: 50 cents/bu ($2,500/contract) above or below the previous day's settlement price. No limit in the spot month (limits are lifted two business days before the spot month begins).

40 Yr Seasonal Chart Long-Term Chart Productions Maps
Supply & Demand TablesSupply & Demand Tables Weekly Export Sales Grain Stocks
Crop Progress Supply & Demand Est. Prospective Plantings

Fundamental Overview:

The U.S. accounts for about half of the world soybean production. Brazil is the second largest producer and they are becoming a formidable competitor in the export market. China and Japan account for a large portion of the U.S. exports. Soybeans are typically planted later than corn, so if weather delays occur in March-April, sometimes farmers will plant soybeans instead of corn. Science has also developed a much heartier bean, which can better withstand adverse weather.

Soybeans are "crushed" to produce soybean oil and soybean meal. Oil is used in numerous products and meal is mainly used for animal feed. The prices of the "complex" tend to move together. However, if the crush rate is high, there may be an oversupply of oil and beans.

Key Trading Notes:

Plantings: Look for USDA estimates of planted acres and weather during plantings. Too much moisture (rain) can delay the farmers from getting crops planted in time. In general, if crops get planted too late, the growing cycle is shortened and yields are lower. Volatility: Soybeans tend to be most volatile during the Plantings (May), Flowering Stage (July / August) for drought concerns and Harvest (October / November). The monthly USDA Crop Reports also cause volatility. They normally are released around the 10th of every month. The USDA gives updated estimates of supply and demand for crops. Weather:Keep a close eye on the weather, especially during July and August. Extreme heat and dry conditions can drastically cut the yield during these months. Many traders will monitor the drought index closely. Temperatures above 100 degrees for several continuous days tend to cut yields.

Key Reports:

  • Planting Intentions
  • - Usually released around the end of March. This gives an indication of how much and which crops the farmers expect to plant for the upcoming season. Fewer acres than expected can be bullish for that particular crop.

  • Monthly Crop Production
  • - The USDA releases a monthly update on estimates for supply and demand of crops. These reports can cause extreme movements in prices, especially during the summer months.

  • Weekly Crop Progress
  • - These reports give an indication of the current development of crops. Also compares to crop conditions in previous years to use as a benchmark. If crops are behind schedule in developing, they have a lower than normal yield and vice versa.

  • Weekly Exports
  • - A good summary of the demand from foreign countries on a weekly basis.

  • Grain Stocks
  • - The USDA provides information on the current supply of grain stocks in the U.S. and the world.

Top 5 States for Production:

1. Iowa 17.5 %
2. Illinois 16.7 %
3. Minnesota 10.5 %
4. Indiana 8.8%
5. Nebraska 6.7%

Soybean Outlook
February 11, 2004
Provided by USDA

U.S. Soybean Exports Beginning To Falter

The U.S. Department of Agriculture (USDA) left unchanged this month the 2003/04 forecasts of U.S. soybean exports and domestic crush at 900 million bushels and 1,455 million bushels, respectively. The expected season average price for soybean meal was raised to $230-$250 per short ton from the January forecast of $225-$245. The price of soybean oil is expected to average 28.0-30.0 cents per pound in 2003/04, up a half-cent from the previous forecast and well above the 2002/03 average of 22 cents.

Expecting record highs for both soybean area and yield, USDA forecast Brazil's 2003/04 production up this month from 60 million to 61 million metric tons. Brazil's 2003/04 soybean exports were forecast up a modest 0.1 million tons this month to 26.7 million, while projected Argentine exports were trimmed to 11.2 million.

Domestic Outlook

Rapid Drop in Outstanding Soybean Export Sales Signals Start of U.S. Supply Rationing

Following several weeks of large cancellations for U.S. export sales of soybeans, total commitments have begun to fall behind last year's sales pace. As of January 29, soybean export commitments were 824.1 million bushels. By comparison, at the same time last year export bookings were 851.4 million bushels. Many of the lost sales recently were due to importers from China either canceling sales outright because of rising costs or switching over delivery to the next marketing year. That could be a pivotal development for U.S. soybean exports because China now accounts for 34 percent of all known origins for outstanding sales. With current prices at a relatively high level and headed higher, new sales are likely to become even harder.

Likewise, export inspections of soybeans (after initially running ahead of last year's shipment pace) have begun to lag. Cumulative inspections through the first week of February 2004 were 638 million bushels or 19 million less than a year earlier. An eventual abatement of demand was inevitable given the large reduction of the 2003/04 available supply. USDA left unchanged the 2003/04 soybean export forecast at 900 million bushels, which would be down from 2002/03 shipments of 1,045 million bushels. For the domestic market, data on September-December 2003 soybean crushing showed only a modest (3.5 million bushels) decline from the previous year. Yet, the major soybean processors announced in January that their operating rates were being scaled back for an indefinite period.

Current availability of soybean supplies has gotten much tighter because of a small beginning supply and record use to date. So, it is likely that the crush in the last three quarters will decline very sharply. The 2003/04 crush forecast (also unchanged this month) is at 1,455 million bushels compared with 1,615 million in 2002/03. Even with an expected drawdown of season ending stocks to a very low 125 million bushels, demand from both crush and exports in subsequent months could plummet to their lowest rates since 1993/94 and 15 percent off of last year's pace. These restrictions of soybean use are happening now because the costs for uncommitted stocks to both domestic and foreign buyers are soaring. Cash price bids for soybeans in central Illinois averaged $8.08 per bushel in January, up nearly 50 cents from the previous month and compared with $5.58 a year earlier. The range for the 2003/04 national average farm price forecast was narrowed slightly this month from $6.90-$7.60 to $6.95-$7.55 per bushel.

Rising Prices Seen Curtailing Demand for Soybean Meal and Soybean Oil

Recent U.S. export sales of soybean meal have also been very subdued. Current export commitments are down 16 percent from last year. USDA has forecast 2003/04 meal exports (at 4.25 million tons) that would be down nearly 30 percent from 2002/03, suggesting that the pace of sales and shipments will both continue to deteriorate as domestic supplies decline. Right now, U.S. export sales lag the most for Indonesia, although a lack of buying is likely to spread to most of the traditional foreign markets.

U.S. sales are being eroded throughout Asia (which typically comprises 25-30 percent of total exports) by a brighter outlook for Indian production and exports of soybean meal and a poorer outlook for imports by the region. Even sales to foreign markets where the U.S. usually has a comparative advantage with freight costs, such as Mexico, could start to slip as domestic needs take precedence. In fact, a domestic deficit of soybean meal is likely to require a record-high volume of U.S. imports this year.

In January, soybean meal prices rose to their highest level since 1997 at $252 per short ton. The impending shortage of soybean meal output, as well as newly announced government restrictions on the use of blood meal in animal feeds, has helped to firm prices. Countering these influences will be a growing surplus of meat and bone meal production that is normally exported but is now bound solely for domestic consumption. The price of meat and bone meal has collapsed nearly in half since December, making it an attractively priced substitute for soybean meal in U.S. poultry and swine rations. The expected season average price for soybean meal was raised to $230-$250 per ton from the January forecast of $225-$245.

For soybean oil, the January average price surged to 30.3 cents per pound, which is more than 40 percent higher than last year. That is the major factor causing a sluggish pace in export sales of soybean oil. Current export commitments have plummeted by 58 percent from a year ago. Much higher commodity and shipping costs could also limit the volume of soybean oil exported via government donation programs, which are allocated a fixed dollar amount each year. The current marketing year export forecast of 850 million pounds would be 62 percent lower than the 2002/03 exports.

So far this season, domestic consumption of soybean oil has shown less slowing than the export pace. Disappearance for the first quarter of 2003/04 declined only about 1 percent from the previous year. However, as soybean oil output and stocks begin to fall more rapidly this spring, rising prices should also ration domestic use. That price is expected to average 28.0-30.0 cents per pound in 2003/04, up a half-cent from the previous forecast and well above the 2002/03 average of 22 cents. USDA forecasts that soybean oil disappearance for the entire marketing year will be down 5 percent to 16,250 million pounds.

International Outlook

Avian Influenza Threatens Feed Use by Asia's Poultry Industry

A wide outbreak of avian influenza in at least 10 Asian countries has caused concern for the welfare of the region's poultry sector. The virus has a deadly impact on many fowl. A more serious matter for some countries is that one current strain has also been linked to human deaths among people having close contact with the sick birds. To halt the disease's spread, producers in affected areas are being compelled to slaughter their flocks and disinfect facilities while unscathed areas vaccinate healthy birds. However, simply culling may not bring full control over the disease if migrating birds are also transmitting it. For a time, domestic meat consumption in these countries may shift toward pork (excluding the mostly Muslim countries of Indonesia and Pakistan). A substitution with pork could require just as much, if not more, consumption of soybean meal as poultry.

However, the most severe consequences for feed use in the region could come from the loss of poultry exports. Most of the world has banned imports of live birds and uncooked poultry meat from the infected countries. The duration of these restrictions depends on how long it takes to contain the disease. For Asia as a whole, the year-to-year increase in soybean meal consumption was scaled back this month by 0.7 million tons, leaving the projected growth at 7 percent compared with 9 percent previously.

Thailand exported nearly 40 percent of its poultry production last year, making it the world's fourth largest poultry exporter. The country has already culled a significant portion of the total flock. Thai consumption of soybean meal in 2003/04 was forecast down by 0.4 million tons this month to 3.2 million. That dimmer outlook led to forecasts for a combination of lower Thai imports of soybeans and soybean meal to 1.75 million and 1.85 million tons, respectively.

Similarly, in Indonesia a substantial cull of chickens is expected because of avian influenza. The anticipated cutback prompted a lowering of the 2003/04 soybean meal import forecast to 1.5 million tons, which would match the previous year's volume. Conversely, a deficit of meat supplies there may then encourage more consumption of soy foods in Indonesia, raising soybean imports to around 1.45 million tons.

Brazil Expected To Consume More Soybean Meal Domestically

Rains throughout the current season have drenched the Center-West states of Brazil, where soybean harvesting is now imminent. In southern Brazil, precipitation was below normal for most of January. Even so, retention of soil moisture remained generally favorable for crop development, and rains during the last 2 weeks have broken up the drying trend there. Those events were particularly timely for soybeans in the southern states of Parana and Rio Grande do Sul, which head into a crucial reproductive stage later this month. Despite the presence of Asian soybean rust in about three-fourths of Brazil's production area, producers are managing its yield damage to a minimal level with a series of fungicide applications. Some producers are even obtaining better than usual yields because of improved control over other crop diseases. Expecting record highs for both soybean area and yield, USDA forecast Brazil's 2003/04 production up this month from 60 million to 61 million metric tons. Brazil's larger harvest and its advanced maturity may largely impact its export competitiveness with Argentina, although the possibility of backlogs in moving it through the ports still exists. For 2003/04, Brazilian soybean exports were forecast up a modest 0.1 million tons this month to 26.7 million, while projected Argentine exports were trimmed back to 11.2 million tons. Yet, without a stronger outlook for foreign soybean consumption over the next 6-8 months, it seems likely that another bumper crop in Brazil could culminate in a bigger domestic stock carryover. Brazilian, American, and European poultry suppliers may share a windfall brought about by the problems of Asian poultry exporters. The ability of U.S. poultry producers to expand production, though, may be constrained by their higher costs for soybean meal. That will not be a barrier for poultry growers in Brazil whose domestic use of soybean meal is expected to accelerate. Those rising domestic needs may then curtail the available 2003/04 supplies of Brazilian soybean meal for export, which were trimmed from 16.5 million to 16.0 million tons.

Larger Soybean Oil Imports by China Anticipated

Soybean crushers in China have struggled lately to maintain their margins as soybean import costs have risen and an accumulation of soybean meal supplies has pressured prices. It may be too early to determine whether the cancellation of import contracts for soybeans is a real sign of avian influenza's impact on the country's poultry sector or just a switching between origins because of price. Much will depend on how well the outbreak is managed internally and whether domestic consumers accept government assurances that eating cooked poultry is still safe. In the meantime, China's demand for vegetable oil is comparatively stronger, and imports of soybean oil are likely to accelerate. Although relatively few of China's soybean oil imports may come from the United States, its trade with Brazil and Argentina could be quite brisk. Soybean oil imports by China were forecast up to 1.8 million tons from the previous estimate of 1.75 million.

Projected 2003/04 palm oil imports by China were also increased from 3.1 million to 3.3 million tons. The currently tight global situation for soybean oil is benefiting palm oil demand. Consequently, stocks in Malaysia, the top palm oil exporter, should remain relatively tight this year given expectations of minimal growth in output there.

USDA Report
Day After Report
Week After Report
Price Reaction
of Reports
Price Change
of Reports
Price Change
Cents Per BU
Cents Per BU
Crop Production 1987-2002
Price Increases
No Price Change(NC)
Price Decreases

Grain Stocks 1984-2002
Price Increases
No Price Change(NC)
Price Decreases

Copyright 2004 FuturesBuzz.com. All rights reserved.