Soybean Economic Value and Discussion – 11/26/2021

In the November 2021 WASDE report the USDA forecast the 2021/2022 US soybean carryout at 340 million bushels or 8% of crop year usage (excluding residual). The accompanying scatter studies plot the winter and early spring high and low for central Illinois soybeans as a function of the US soybean carryout to usage ratio. We use the ratio forecast by USDA in the early spring assuming  this is the market’s expectation over the winter spring period. Note that, at least based on history, a tighter than 8% carryout to usage ratio is needed  to maintain $12 per bushel plus soybeans. 

But at least two factors need to be considered when evaluating the soybean economic value studies. The November soybean supply/usage balance published by USDA is dependent on the assumption of average weather conditions during the Austral growing season. The 2021/2022 Brazilian and Argentine soybean production cycle is just underway. And that USDA has forecast that strong demand for biodiesel will keep soybean oil prices averaging $30/cwt.  plus above the 2020/2021 forecast published at the same time a year ago. The increase in the value of soybean oil would be the equivalent of almost $2/bushel.   

Soybean market bears are faced with two months plus of uncertainty concerning South American weather and hoping that the recent weakness in soybean oil values will continue through the winter.