What’s Ahead for Soybean        Markets     Gary Schnitkey   University of Illinois                            1
World Soybean Production                     300                     250Million Metric Ton                     200        ...
World Consumption                     300                     250                     200Million Metric Ton               ...
World Ending Stocks                      4
US ProductionYear          Yield              Acres        Production             Bu/acre           Thousand       Million...
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       ...
Precipitation at Urbana, IL (inches) Year      June       July     August 2012       2.2 2011       4.2       1.5       1....
Lowest Rainfall Years Since 1910,          Urbana, IL July Rainfall       August Rainfall   Year    Inches      Year    In...
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...
For RP holders, Consider Hedging           Production• Nov 2012 contract on 7/25/2012 was at  $16.00 per bushel• Many hold...
RP and Hedging• TA-APH yield = 45 bushels• Coverage level = 80%• Make payments when yield below 36  bushels (45 bushels x ...
• 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...
Projected Production                               South Year            US           America           ROW           Tota...
South American Production                         (million metric ton)                     160                     140    ...
Soybean Consumption             (Million Metric Ton)Marketing              South  Year        U.S.    America   ROW      T...
Soybean Meal Consumption, China, EU     China (1,000 Metric Ton)                 EU-27 (1,000 Metric Ton)60,000           ...
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...
Summary• Short consumption while continuing  projected strong demand• Lead to strong prices                               ...
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Soybean College - Gary Schnitkey, Ph.D.

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"What's Ahead for Soybean Markets?"

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Soybean College - Gary Schnitkey, Ph.D.

  1. 1. What’s Ahead for Soybean Markets Gary Schnitkey University of Illinois 1
  2. 2. World Soybean Production 300 250Million Metric Ton 200 ROW 150 US 100 South America 50 0 2 Marketing Year
  3. 3. World Consumption 300 250 200Million Metric Ton 150 ROW US 100 South America 50 0 Marketing Year 3
  4. 4. World Ending Stocks 4
  5. 5. US ProductionYear Yield Acres Production Bu/acre Thousand Million bu.2008 39.7 74,681 2,9672009 44.0 76,373 3,3592010 43.5 76,616 3,3292011 41.5 73,636 3,0562012 40.5 75,315 3,050 2012 Projected in July, WASDE report Current unknown is yield 5
  6. 6. U.S. Yield 2012 Trend Yield = 43.7 bushels 6
  7. 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 -1.82012 P 40.5 43.7 -3.2 7
  8. 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. 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. 10
  11. 11. Percent of Normal Rainfall, Last 30 Days, AHPIS 11
  12. 12. Percent of Normal Rainfall, Last 60 Days, AHPIS 12
  13. 13. November 2012 Futures Contract 13
  14. 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. 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. 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. 17. • Current prices are not good price• Can hedge up to production guarantee 17
  18. 18. Pre-harvest Hedging• Good strategy to spread sales, including pre-harvest• Hedging losses are occurring on spring hedges• Be consistent 18
  19. 19. Projected Production South Year US America ROW Total2008/09 80.75 93.80 37.82 211.952009/10 91.42 130.88 38.76 261.082010/11 90.61 132.87 41.22 264.692011/12 83.17 110.50 43.20 235.882012/13P 83.01 140.80 43.35 267.16 Following shows projections with 37.5 U.S. yield2012/13P 77.00 140.80 43.35 261.15 19
  20. 20. South American Production (million metric ton) 160 140 120Million Metric Ton 100 80 60 40 20 0 Marketing Year 20
  21. 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 79.08 205.08 253.422012/13P 47.21 84.08 215.93 263.15 21
  22. 22. Soybean Meal Consumption, China, EU China (1,000 Metric Ton) EU-27 (1,000 Metric Ton)60,000 60,00050,000 50,00040,000 40,00030,000 30,00020,000 20,00010,000 10,000 0 0 2007 2008 2009 2010 2011 2012P 2007 2008 2009 2010 2011 2012p
  23. 23. Ending Stocks 23
  24. 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. 25. Summary• Short consumption while continuing projected strong demand• Lead to strong prices 25

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