Spend Matters welcomes another guest post from Sam Parry of Mintec.
In July, we wrote about the exciting prospects for the wheat harvest in the Northern Hemisphere. Now we take stock of recent “speculative” concerns over the current soybean crop in the US, the biggest soybean producer in the world.
Soybean production in the US is expected to reach 88.6m tons in the 2013/14 season, representing an increase of 8% year-on-year. This figure includes the recent downward revision made in August of 4.5m tons.
Dry weather at this time of year can stress the crop’s development, as this is when soybeans are going through the crucial pod filling stage of their growth when moisture levels are critical. Overall crops are still reported to be progressing nicely, with around 58% of the US soybean crop reported to be in good or excellent condition.
Soybean prices had been on a downward trend throughout 2013 because of an expectation for good global supply, but prices have risen sharply in recent weeks as a result of the revised production forecasts. This makes the current spike in US soybean prices interesting, as the crops are still looking good and the price of soybean on the CBOT future exchange is still down 22% year-on-year.
Global soybean production is expected to rise by 5% year-on-year to a record high of 281.7m tons. This rise is driven by increased production in South America as well as in the US. Soybean production in both Brazil and Argentina is expected to rise again, following last year’s increase. Production in Brazil for 2013/14 is forecast to increase by 4% and Argentina by 8%.
So while global production is expected to reach record highs this year, the current adverse weather conditions in the US and the uncertainty caused by the wait until South America plants its crop mean that the market is going through a fascinating period.