Soybean Market Situation

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Soybean Market Situation And Outlook
2008 Southern Ag. Outlook Conference
Atlanta, Georgia
September 24, 2008
Kurt M. Guidry
Professor
Department of Agricultural Economics
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Current Issues

• Despite Increased Production, Stocks Expected To
  Remain Tight

• Weaker US Dollar Has Supported Export Demand
  Despite Higher Prices

• While Lower, World Stocks Still At Comfortable
  Levels

• Speculative (Non-Commercial ) Activity Continue
  To Help Shape Market

• Historically High Prices Persist (Basis Levels
  Remain Weak)

• Prices Remain Volatile, Downward to Sideways
  Trend To Harvest

• Longer Term Prices Likely Shaped By Crop Acreage
  

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Fundamental Supply and Demand Conditions
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U.S. Soybean Supply and Demand U.S. Soybean Supply and Demand U.S. Soybean Supply and Demand U.S. Soybean Supply and Demand U.S. Soybean Supply and Demand U.S. Soybean Supply and Demand U.S. Soybean Supply and Demand
5 Year 2007/08 2008/09 ---------- Percent Change ---------- ---------- Percent Change ---------- ---------- Percent Change ----------
Average Sept. 2008 Sept. 2008 5 Year Avg. Last Year Last Month
Planted 72.0 63.6 74.8 3.95 17.61 0.00
Harvested 71.0 62.8 73.3 3.21 16.72 0.00

Yield 40.6 41.2 40.0 -1.48 -2.91 -1.23

Begin Stocks 314 574 140 -55.40 -75.61 3.70
Production 2,883 2,585 2,934 1.78 13.50 -1.31
Total Supply 3,203 3,169 3,084 -3.73 -2.68 -1.03

Crush 1,717 1,815 1,785 3.95 -1.65 -1.65
Exports 1,041 1,155 1,000 -3.91 -13.42 0.00
Demand 2,897 3,029 2,949 1.78 -2.64 -1.04
End Stocks 306 140 135 -55.92 -3.57 0.00

S-T-U 10.39 4.62 4.58 -55.93 -0.96 1.05

Price 7.06 10.15 12.35 74.83 21.67 0.82
Source USDA, World Agricultural Supply and
Demand Estimates, September 2008
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Stock Situation Remains Positive And Points To
Continued Strong Prices
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(No Transcript)
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Despite Increased Production in 2008, Solid
Export Demand Due To Weaker Dollar and Strong
Domestic Crush Expected to Keep Stocks Tight
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U.S. Currency Exchange Rate Selected Countries
Brazil
Japan
Have We Seen the End to Falling Dollar ?
Mexico
China
Source St. Louis Federal Reserve
10
08/09 Exports Down 32 From 07/08
Source USDA, Foreign Agricultural Service
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Sharp Increases in Biodiesel Production Providing
Support For Soybean Oil
Source National Biodiesel Board
http//www.biodiesel.org
12
Source USDA, Economic Research Service
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World Supply and Demand

• Increases in US and South America Production
  Expected to Bring
• Increases In World Stocks

• While Stocks Are Down From High Two Years Ago,
  Still Above
• Long Term Average

• While Prices Remain Strong, Fundamentally, World
  Supply and
• Demand Situation Still Comfortable

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Source USDA, Foreign Agricultural Service
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Source USDA, Foreign Agricultural Service
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Source USDA, Foreign Agricultural Service
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Chinas Activity In Soybean Market Is Large
Factor In US Export Performance
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Source USDA, Foreign Agricultural Service
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Short Term Price Movement Likely Determined By
Progression of Crop to Harvest (And Speculative
Activity)
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(No Transcript)
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Source DTN AgDayta
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Source DTN AgDayta
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Without Weather Concerns, Expect Sideways To
Downward Trending Market To Harvest Speculative
Activity And Spillover Influences From Outside
Markets Could Alter Trend
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2002-07 Avg
Source USDA, National Agricultural Statistics
Service
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Source USDA, Agricultural Marketing Service
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Source USDA, Agricultural Marketing Service
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Soybean Futures Contract Prices September 22,
2008
Source DTN AgDayta
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Soybean Futures Prices Long Term Trend
Source DTN AgDayta
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Soybean Futures Prices Seasonal Index
Source DTN AgDayta
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Soybean Futures Contracts Commitment of Traders
Reduction in Speculative Position Has Helped
Soften Market Is A Reversal In This Trend
Going To Happen As A Result Of Outside Market
Influence?
Source DTN AgDayta
31
Basis Levels Remain Historically Weak Departure
of Futures From Fundamentals And Increased
Transportation Costs
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Source USDA, Agricultural Marketing Service
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Longer Price Trend Will We See Another Battle
For 2009 Acres?
Tight Stock Situation For Both Corn And Soybeans
Suggest Both Markets Will Look To Attract
Additional Acres in 2009
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Soybean Price Needed For Equal Returns Above Variable Costs With 4.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 4.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 4.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 4.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 4.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 4.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 4.00 Corn
  ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre -----------------------------
Corn Variable /Ac 140 150 160 170 180 190 200
350 9.57 9.81 10.05 10.29 10.52 10.76 11.00
400 8.38 8.62 8.86 9.10 9.33 9.57 9.81
450 7.19 7.43 7.67 7.90 8.14 8.38 8.62
500 6.00 6.24 6.48 6.71 6.95 7.19 7.43

Soybean Price Needed For Equal Returns Above Variable Costs With 5.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 5.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 5.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 5.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 5.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 5.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 5.00 Corn
  ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre -----------------------------
Corn Variable /Ac 140 150 160 170 180 190 200
350 13.21 13.45 13.69 13.93 14.17 14.40 14.64
400 12.02 12.26 12.50 12.74 12.98 13.21 13.45
450 10.83 11.07 11.31 11.55 11.79 12.02 12.26
500 9.64 9.88 10.12 10.36 10.60 10.83 11.07

Soybean Price Needed For Equal Returns Above Variable Costs With 6.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 6.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 6.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 6.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 6.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 6.00 Corn Soybean Price Needed For Equal Returns Above Variable Costs With 6.00 Corn
  ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre ----------------------------- ----------------------------- Soybean Variable Cost Per Acre -----------------------------
Corn Variable /Ac 140 150 160 170 180 190 200
350 16.86 17.10 17.33 17.57 17.81 18.05 18.29
400 15.67 15.90 16.14 16.38 16.62 16.86 17.10
450 14.48 14.71 14.95 15.19 15.43 15.67 15.90
500 13.29 13.52 13.76 14.00 14.24 14.48 14.71
Current Futures Dec 09 Corn _at_ 5.96, Nov 09
Soybean _at_ 11.95
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At Current Prices For 2009, Would Seem To Favor
Corn At Average Yields Will Soybean Prices Have
To Increase Relative To Corn Prices To Maintain
Acres ?
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Summary

• Historically Strong Prices

• Fundamentally, Would Expect Prices To Trend
  Slightly Down or
• Sideways Into Harvest and Then Improve As
  Battle For 2009
• Acres Begin

• Tight Stocks Will Keep Market Volatile

• Increased Volatility Increased Marketing Costs
  and Perhaps
• Limited Marketing Alternatives

• Fundamentally, World Stocks Still Comfortable
  Will That
• Limit Upside Potential ?