Soybeans are seeing a spike in price, according to a marketing specialist at the University of Illinois, resulting from a weaker South American crop and increasing demand for oil and livestock feed in China.
April 24, 2009 By Corn and Soybean Digest/Delta Farm Press
April 23, 2009
Soybeans are the hot commodity right now, according to Darrel Good, University of Illinois (U of I) Extension marketing specialist. Robust Chinese export demand is the main factor behind a recent surge in prices, says Good.
"China is the big buyer in the global market, and as long as their demand holds up, so will soybean prices," he explains. "For now, the Chinese demand for soybeans – both to process into oil for human consumption and into meal for livestock feed – remains very strong."
Reduced soybean production in South America is another big reason for recent increases in U.S. soybean prices, adds Good. "Brazil’s soybean production is down 6.6 percent, Argentina’s is down 15.6 percent and Paraguay’s is down 42 percent from last year," he says. "With a smaller South American crop, global demand is pushing more business to the US"
The USDA’s most recent projection of 165 million bushels remaining from the 2008 soybean crop is a third reason for recent price hikes, notes Good. "We’re at about 5.5 percent of what we expect to use this year," he says. "Any time you get around a five percent stocks-to-use ratio, that’s getting uncomfortably close to the minimum for some buyers."
The 2003 soybean stocks-to-use ratio fell to 4.5 percent, "which is as low as we’ve ever gone," adds Good. "That also explains what’s happened here this month," he says. "The low stocks-to-use ratio was lower than expected and the markets began to wake up."
The next USDA soybean supply and demand update will be on May 12, says Good. If that report shows continued strong export demand, soybean prices could ratchet up another notch, depending on the weather outlook for the growing season.
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For a related story, check out: cornandsoybeandigest.com/richardbrock/0420-china-extend-soybean-purchases/