U.S. Oilseed Situation and Outlook 2000-01Nick PiggottNorth Carolina State University

Southern Regional Outlook Conference

Southern Region Soybean Production

Current Soybean Crop Conditions

Projected Supply/Demand for U.S. Soybeans 2000-01

Million BushelsBeginning Stocks: 265Production: 2,900 (73.5 million acres @ 39.5 bu/acre)Total Supply: 3,167

Crush: 1,630Exports: 1,000Total Use: 2,802

Ending Stocks: 365U.S. Season Average Price: $4.35-$5.15

Record Soybean Use in 2000-01Record Crush of 1.63 billion bushels2.5 % in meal use from 99/00 2 % domestically from 99/00 4 % exports from 99/005% in oil use from 99/003 % domestically from 99/0031 % exports from 99/00

Record exports of 1 billion bushels in Brazil and Argentina exports helpfulimproved export prospects to China

World Soybean Trade

World Soybean Supply, Trade, and Ending Stocks

Price Prospects for U.S. SoybeansUSDA projecting price in $4.35/bu to $5.15/bu rangeimprovement from the earlier $3.90/bu-$4.80/bu estimates

S-Nov 2000 contract low of $4.501/2/burallied to around $5.00 level after August weather

Burdensome ending stocks dampen rally

The carry between S-Nov 00 and S-Mar 01 is about $0.20/bu currently

Marketing StrategiesWith cash prices below the loan rate program details become important for loans, LDPs, and certificates

On-farm or off-farm storage availability?What does it costs to store soybeans?On-farm: 4-5 cents/monthOff-farm: 7-8 cents/month for a 5 month period

Rough calculations of returns to soybean storagecurrently about 38 cents - storage costs for storage until March (using Elizabeth City, NC example)on-farm storage returns 13 centsoff-farm storage is about break-even

On-Farm Storage StrategiesStorage Hedgeconservative: store grain, price using forward or hedge, and take the LDP at same timemoderate: store grain, hedge using a put option, and take the LDP at same timeaggressive: store grain, leave grain unpriced, and take the LDP at same time

Merits of storage are stunted when prices are below loan ratemust try to capture large LDP or use 60 day lock-in to get some upside potential

No On-Farm StorageLess flexibility to do better than the loan rate

Commercial storage only if:forward price charges and interestorlocal basis is extremely weak at harvestuse a HTA contract

Sell soybeans at harvest, take the LDP, and buy a call optioncurrently an at-the-money S-Mar 01 call costs $0.27/bu

Looking Ahead to 2001/02If bumper crop prevails in 2000-01 and ending stocks are 365 mill. bu. this will dampen prospects for 2001/02similar acreage and trend yields and declining exports in world market means production > demand in 2001-02

Brazil and Argentina production important for U.S. exports

Planting price opportunities and weather premiums

U.S. prospects hinge onnew markets for U.S. soybeans, and meal and oillarge increase in demand to offset supply