U.S. Oilseed Situation and Outlook Nick Piggott North Carolina State University Southern Regional Outlook Conference

Southern Region Soybean Production

Current Soybean Crop Conditions

Projected Supply/Demand for U.S. Soybeans Million Bushels Beginning Stocks: 265 Production: 2,900 (73.5 million 39.5 bu/acre) Total Supply: 3,167 Crush: 1,630 Exports: 1,000 Total Use: 2,802 Ending Stocks: 365 U.S. Season Average Price: $4.35-$5.15

Record Soybean Use in Record Crush of 1.63 billion bushels –2.5 %  in meal use from 99/00  2 %  domestically from 99/00  4 %  exports from 99/00 –5%  in oil use from 99/00 *3 %  domestically from 99/00 *31 %  exports from 99/00 Record exports of 1 billion bushels –  in Brazil and Argentina exports helpful –improved export prospects to China

World Soybean Trade

World Soybean Supply, Trade, and Ending Stocks

Price Prospects for U.S. Soybeans USDA projecting price in $4.35/bu to $5.15/bu range –improvement from the earlier $3.90/bu-$4.80/bu estimates S-Nov 2000 contract low of $4.50 1/2 /bu –rallied 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 Strategies With cash prices below the loan rate program details become important for loans, LDP’s, and certificates On-farm or off-farm storage availability? –What does it costs to store soybeans? On-farm: 4-5 cents/month Off-farm: 7-8 cents/month for a 5 month period Rough calculations of returns to soybean storage –currently about “38 cents - storage costs” for storage until March (using Elizabeth City, NC example) –on-farm storage returns 13 cents –off-farm storage is about break-even

On-Farm Storage Strategies Storage Hedge –conservative: store grain, price using forward or hedge, and take the LDP at same time –moderate: store grain, hedge using a put option, and take the LDP at same time –aggressive: store grain, leave grain unpriced, and take the LDP at same time Merits of storage are stunted when prices are below loan rate –must try to capture large LDP or use 60 day lock-in to get some upside potential

No On-Farm Storage Less flexibility to do better than the loan rate Commercial storage only if: –forward price  charges and interest or –local basis is extremely weak at harvest use a HTA contract Sell soybeans at harvest, take the LDP, and buy a call option –currently an at-the-money S-Mar 01 call costs $0.27/bu

Looking Ahead to 2001/02 If bumper crop prevails in and ending stocks are 365 mill. bu. this will dampen prospects for 2001/02 –similar acreage and trend yields and declining exports in world market means production > demand in Brazil and Argentina production important for U.S. exports Planting price opportunities and weather premiums U.S. prospects hinge on –new markets for U.S. soybeans, and meal and oil –large increase in demand to offset supply