Stock up on Soybeans in 2012

April 04, 2012

This past Friday, March 30th, the United States Department of Agriculture (USDA) released the 2012 Prospective Plantings report, which included various estimates. Amongst the estimated data, the Prospective Planting report included a lower than anticipated soybean forecast. According to the report, “Soybean growers intend to plant an estimated 73.9 million acres in 2012, down 1 percent from last year and down 5 percent from 2010. Compared with last year, planted acreage intentions are down in many areas as some acreage is expected to shift to corn” (USDA).

The projections on soybeans from the USDA indicate that soybean ending stock is expected to reach dangerously low levels. After the release of the USDA prospective planting report, soybean future prices quickly skyrocketed as anticipated rationing of soybean stock will most likely result throughout the year. The price of soybeans ended up over 3% from the previous day’s close indicated from the chart above. Although it may be too late for U.S. farmers to switch acres to soybeans this season due to the fieldwork they have already completed, the higher prices have the potential to entice South American farmers to switch during their next planting season. This additional soybean production will be necessary to fulfill Chinese demand as they continue to be a dominant player in the agricultural market.

Sources:

• USDA Prospective Plantings report
• Farm Press Article: by Dr. Scott Irwin, Dept. of Agriculture and Consumer Economics, University of Illinois
• Bloomberg article – China reference