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Record soybean crop, prices are still strong
By TIM ALEXANDER
Illinois Correspondent
 
BLOOMINGTON, Ill. — USDA’s June 30 announcement that a record 89.5 million acres of soybeans are planted in 2017 – a 7 percent increase over last year – did not keep the agency from raisingits forecast of the 2017/18 average farm price for soybeans by a dime, to $8.40-$10.40 per bushel.
 
This is largely due to the expected lowering by 35 million-40 million bushels of season-ending stocks to approximately 460 million, and also reflects rising demand for exports of U.S. soybeans. In other words, an increase in soybean production should serve to meet increased demand, rather than drag down prices, many analysts indicate.

“We are confident that overall increased demand for soybeans, including demand from exports, can overcome price challenges associated with increased production,” said Mark Albertson, director of market access for the Illinois Soybean Assoc. (ISA), on July 14. “The markets have been going up and down the last week or so on soybeans, but I can tell you that even though production is at record pace, the demand is also at record pace.

“It’s amazing to see how much the Chinese have been buying, and a lot of that is because the hog market in China is still profitable. Even though the economy in China has slowed down in the last year or two, the population is still eating a lot of pork. All those hogs need soybean meal.”

The recent suspension of China’s 13-year embargo on U.S. beef products should also stimulate demand for soybeans as feed, though not to the extent of pork’s impact on the soy market, according to Albertson. “The opening of the Chinese market presents further opportunities for soybeans,” he explained. “The worldwide demand for soy has been really phenomenal. About 25 to 30 percent of all the soy grown in the U.S. ends up going to China, so that’s really our big export market.”

Approval of the Transpacific Partnership (TPP) trade agreement, supported by the previous administration but declared a non-starter by President Donald Trump, would have provided American farmers with an expanded market for soybean products, including “soy-fed pork to Japan,” Albertson noted, “so we can’t afford to lose any more markets.

“Having the Chinese market open up to beef is really essential. We can’t afford to lose the Chinese market or the Mexican market, as both markets are very important to us.”

Even with the apparent loss of TPP, “the future looks good” for U.S. soybean exports, he said. “The size of the soybean crop will continue to meet the demand.” Many market pundits anticipated the latest USDA World Agricultural Supply and Demand Estimates (WASDE) report, issued July 12, to provide more definitive market signals.

Market analysts John C. Baize and Associates noted the most significant changes for the soybean sector in the report included an increase of 50 million bushels in 2016/17 soybean exports, to 2.1 billion, and increase in U.S. soybean use of 40 million bushels, to 4.118 billion. In addition, U.S. ending stocks were reduced by 40 million bushels to 410 million, according to the firm.

For 2017/18, soybean production was increased by 5 million bushels in the WASDE report, while ending stocks were reduced by 35 million. It all adds up to favorable odds for many soybean growers to turn a profit during the 2017/18 marketing year – not considering weather and other variables – thanks to less burdensome soybean stocks and higher prices.

With a more robust return-oninvestment for soybeans over other crops year after year, many farmers in regions other than the Midwest are foregoing wheat planting in favor of more soybeans. “Nationwide, there is a lot of wheat grown, and in terms of acreage displacement probably a lot more wheat acreage has been displaced for soybeans than corn,” Albertson said. “In Illinois, the last I saw, there was only about a 1 percent increase in soybean acreage this year.

“If you go out to South Dakota and North Dakota, that’s where we are seeing a lot of transfer of acreage from small grains like wheat and canola to soybeans.” Furthering international trade agreements remains key to keeping U.S. and Illinois soybean production profitable, Albertson continued. “It’s very important to do all we can in Washington and other places to maintain those good trade relations,” he noted. 
 
Soybeans held the second-highest export value among all exported Illinois products in 2016, after increasing by 53 percent over their 2016 value level. Illinois’ total soybean export value is estimated at around $3 billion annually.

ISA leaders hope to see farmers close in on the group’s stated goal of harvesting and using 600 million bushels of soybeans by 2020 in this year, after narrowing the gap to within 7 million bushels of that target in 2016. ISA received the Governor’s 2016 Agricultural Business Exporter Award for its efforts to promote and advance soy in Illinois. 
7/19/2017