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.

1. What’s 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

4. World Ending Stocks
4

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

23. Ending Stocks
23

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