Soybean Complex Outlook: 2003/04 Dr. Matthew C. Roberts The Ohio State University Midwest, Great Plains, and Western Outlook Conference Indianapolis, IN.

Soybean Complex Outlook:2003/04

Dr. Matthew C. RobertsThe Ohio State University

Midwest, Great Plains, and Western Outlook Conference

Indianapolis, IN August 14-15, 2003

2002/03 Highlights: Domestic Soybean Production

Yields (-7.2% v. trend; -4.5% v. 2001) Excellent yields in WCB Poor yields in ECB Avg/Below Avg Yields in South

Acreage 73.76m Planted 1.6m Abandoned

Improved Prices Soybeans: $5.45 (+23% v. 2001)

2002/03 Highlights: World Production

World Bean Production +6.2% US Production -5.5% South American Production

+19.7% Acreage +17%

Chinese Production +7.1% World Oilseed Production +5.5%

2002/03 Highlights: Domestic Bean Use

Meal Use -2.8% Lower hog numbers Increased DDG competition

Oil Use +0.8%

2002/03 Highlights: Bean Complex Exports

Beans -3%, Meal -21%, Oil -14% Large S. Am. crop and high US

prices dampened demand.

2003 US Crop

US Plantings: -0.5m acres Abandonment vs. Corn Shift in ECB?

Currently 72.7m acres for harvest, +0.5m

Nationwide, yield prospects very good: Crop development late Crop conditions quite good.

2003 S. Am. Crop

Plantings: +6% acres Prices lower than last year, weaker $

World Oilseed Ending Stocks

10

15

20

25

30

35

40

45Million Metric Tons

Year

27.2

16.4

42.35

15.7

26.8

33.86

World Oilseed Supply & Demand

11.313.8

11.5 11.2 10.7 11.1 10.5 9.7 10.48.7

10.68.4

7.210.3 10.9 11.3 11.4 11.4 11.7 12.2

0

5

10

15

20

25

30

35

40

Year

Percent

60

110

160

210

260

310

360

Million Metric Tons

Production 352Use 347

World Soybean Supply & Demand

1925

19 19 18 20 19 17 1714

1813

915 16 17 18 18 18 19

0

10

20

30

40

50

60

70

Year

Percent

0

50

100

150

200

Production 207

Use 204

Million Metric Tons

Stocks-to-Use Ratio (%)

U.S. Soybeans

28.021.0

15.011.013.0

18.013.613.410.714.0

7.8 7.613.410.7 7.95.4 8.8 7.1 5.6

0102030405060708090

100

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03

Year

Percent

0

0.5

1

1.5

2

2.5

3Bn Bushels

Use 2.78

Stocks-to-Use Ratio (%)

Production 2.89

U.S. Soybeans: Domestic Use

600

800

1,000

1,200

1,400

1,600

1,800

1970 1975 1980 1985 1990 1995 '00

Year

Mill

ion

Bu

she

ls

898

12041285

1820

U.S. Soybeans: Exports

300

400500

600

700800

900

1,0001,100

1,200

1970 1975 1980 1985 1990 1995 '00

Year

Million Bushels

539

929

804838

1000

589527

1070

4.004.505.005.506.006.507.007.508.008.509.00

0 5 10 15 20 25 30 35

Pri

ce:

$/b

u.

Stocks to use ratio

82

8586

87

83

84

92

88

90

8991

94

93

9596

1982-1990

1991-1997

97

9899

Soybeans: Stocks-Price Relationship

00

01

02 03

1998-2003

WAOB Projections for 2003/04

2002/03 Est 2003/04 ProjArea Planted 73.8 73.7 Harvested 72.2 72.6Yield per harvested acre (bu.) 37.8 39.4 Beginning stocks 208 145Production 2,730 2,862Imports 2 4 Supply, total 2,942 3,011Crushings 1,610 1,625Exports 1,040 1,000Seed 90 89Residual 57 77 Use, total 2,797 2,791Ending stocks 145 220Avg. farm price ($/bu) 5.50 4.55 - 5.55Stocks-to-Use Ratio 5.2% 7.9%

Million Acres

Milllion Bushels

Short-term risks/surprises Late crop development: more

uncertainty about final yields? Meal competition from ethanol by-

products Chinese demand Reduced Brazilian competition due

to USD weakness Current level of Brazilian stocks?

WAOB Projections for 2003/04

2002/03 Est 2003/04 Proj RangeArea Planted 73.8 73.7 Harvested 72.2 72.6Yield per harvested acre (bu.) 37.8 39.4 39 - 39.6 Beginning stocks 208 145Production 2,730 2,862 2.83 - 2.89Imports 2 4 Supply, total 2,942 3,011 2.98 - 3.03Crushings 1,610 1,625 (?)1650Exports 1,040 1,000 (?)1030Seed 90 89Residual 57 77 Use, total 2,797 2,791 2.79 - 2.84Ending stocks 145 220 160 - 300Avg. farm price ($/bu) 5.50 4.55 - 5.55 4.60 - 5.40Stocks-to-Use Ratio 5.2% 7.9% 5.7 - 10.7%

Million Acres

Milllion Bushels

Soybean Futures Term Structure

Sep03 $5.53Nov $5.50Mar04 $5.54May $5.51Jul $5.53Nov $5.37

Updated 14 August 2003

Futures Prices

Currently imply national average price of $5.00 - $5.15

Where is the risk: Doing the right thing too late? Doing the wrong thing too early?

Marketing LDP’s are gone for now…will they

return? Volatility is very high. Small carryovers leave door open

for big moves. Look to sell at and above $5.50 @

CBOT.or….

Long-term

Brazil: how fast can they expand soybean production?

What is the price elasticity of demand?

How will China evolve? Is RR on the cusp of approval in

Brazil? If so, what does this mean for the US?

Updated Copies:

Available at http://aede.osu.edu/people/roberts.628

email: [email protected]