Demand prospects for old crop and new crop soybeans
Assuming that the 2013 U.S. soybean crop is near its potential of 3.4 billion bushels, rationing should not be an issue in the 2013-14 marketing year. The strength of demand for U.S. soybeans, then, will determine price and magnitude of consumption. Two factors support prospects for strong soybean demand in the year ahead. First is the expectation that China will continue to import large quantities of soybeans so that U.S. exports will increase even with large crops in South America. These expectations are supported by current export sales data showing that China has already purchased nearly 400 million bushels of U.S. soybeans for import during the 2013-14 marketing year. Sales to China are about 25 million bushels larger than at this time last year.
The second potentially friendly demand factor for soybeans is increasing biodiesel production. The amount of soybean oil used for biodiesel production in the year ahead, and beyond, depends on a large number of factors. These include U.S. biofuels policy; the pace of expansion in the domestic ethanol blend wall; and the competition from other biodiesel feedstocks, particularly imported palm oil. The USDA currently projects that soybean oil used for biodiesel will reach 5.5 billion pounds in 2013-14, up from 4.8 billion pounds this year and 4.87 billion pounds last year. The projection represents nearly 28 percent of total projected domestic use and exports of U.S soybean oil.
Unlike the U.S. corn market, where demand and consumption appear to be plateauing, demand prospects for soybeans appear to be strong. If that is the case, a period of higher soybean prices relative to corn prices would be expected.
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