Good continued saying, that beyond the current marketing year, the soybean market also anticipates a rebound in U.S. production in 2013. “If acreage is maintained at the 2012 level and the U.S average yield rebounds to a trend value near 43.8 bushels, the 2013 crop would be near 3.34 billion bushels, 478 million larger than the current forecast of the 2012 crop. This expectation is reflected by the much lower futures price for the 2013-14 marketing year,” he said.
Good said that deferred soybean futures prices are lower than nearby prices in anticipation of larger South American and U.S. crops in 2013, but it should be noted that those prices are still higher than the average prices received for the 2010 and 2011 crops. “That is, there is some production risk reflected in the current price structure so that if current expectations materialize, even lower prices should be expected,” Good said. “The immediate focus is on South American weather and production prospects there. For the month of October, much of the central and western portions of the production area in Brazil received less-than-average precipitation while much of Argentina was extremely wet. Not much can be said about 2013 U.S. production prospects at this point. While drought conditions have been alleviated in much of the eastern producing areas, dryness persists in portions of the western Corn Belt and much of the Central Plains,” he said.
“With current unsettled weather conditions and large crops needed in both South America and the U.S. in 2013, the soybean market may be understating production risk. If so, modestly higher prices for the 2013 crop would be expected,” he said.