American soybean growers expect continued strong prices for their crop despite an anticipated jump in seeded acreage.
The United States Department of Agriculture projects a 71 million acre soybean crop, up from 63.6 million acres in 2007.
John Hoffman, president of the American Soybean Association, said the industry could gain back about half of the 11.9 million acres it lost to corn last year.
But he doesn’t think that will be a burdensome increase in plantings because global soybean demand is rising due to a growing population and an ever-expanding middle class.
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“The first thing they want is protein in their diets: livestock, pork and poultry. Soymeal is the feed that the livestock eat,” he said.
Soy consumption had been rising at a pace of five percent per year for a decade. In 2007, it rose more than six percent from the previous year.
“With that growing demand, it doesn’t look like there is any driving reason for a huge reduction in prices,” said Hoffman.
That is good news for Canadian canola growers, whose values are strongly influenced by what happens in U.S. soybean markets.
Part of the reason for Hoffman’s optimistic price outlook is the depleted stockpile of U.S. soybeans.
The projected carryout from the 2007-08 marketing campaign amounts to a 21-day supply of the crop.
“It’s critically low,” he said.
A six or seven million acre increase in soybean plantings should rebuild the stockpile to a reasonable level and help to meet the expanding global demand, but it won’t be enough to drive down prices.
“I think we’re in more of a demand driven market than a supply driven market,” said Hoffman.
The supply story isn’t that troublesome when you take South American production into account. Plantings were down in key growing areas like Brazil and Argentina due to unfavourable exchange rates and competition from crops like corn, cotton and sugarcane.
The latest reports from Brazil call for 58 to 60 million tonnes of production, which is a far cry from what the industry anticipated last fall.
“I would have thought they would have been at 63 or 64 million tonnes,” said Hoffman.
With seed technology companies set to release new GM soybean varieties that will boost yields by seven to 12 percent, meeting the growing demand for vegetable oil should be less of a challenge in the future.
“Two to three years down the road, some of the pressure will be taken off the supply side because of biotechnology,” said Hoffman.
