by George Flaskerud, Crops Economist
North Dakota State University Extension Service

The pace of soybean exports must improve sharply for soybean prices to recover. Export commitments as of Nov. 24, were only 39 percent of total exports projected for the marketing year. The five-year average is 58 percent. Export commitments are actual exports, plus unshipped sales.

The USDA likely will reduce the projected exports in its supply-and-demand report on Dec. 9. It reduced its projection in the November report to 1.075 billion bushels from 1.115 billion in the October report. For the 2004-through-2005 marketing year, exports totaled 1.103 billion bushels.

China and the European Union (EU-25) are both significantly behind a year ago. As of Nov. 24, the EU-25 was at 33 percent of a year ago and China was at 67 percent. In absolute numbers, China is by far the furthest behind. The pace to China was down by 2.21 million metric tons (mmt), while the EU-25 was down by 1.44 mmt.

Soybean futures prices generally have been drifting down since they peaked in June. The May 2006 futures peaked in June at $7.41, reached a low in November at $5.67 and closed Dec. 2 at $5.75.

A recovery in May futures would encounter resistance at several levels. Overhead resistance would be met at about $6.15. The next level of resistance would be a gap left mid-August at $6.41. After that, the futures price would run into overhead resistance at about $7.

A year ago, the May futures contract bottomed out in early February at about $5. It then rallied to about $6.90 by mid-March. The May contract generally has rallied into the March-May period since 2002. During 2001, the May contract generally declined into late April.

The gap in the May contract at $6.41 could be a reasonable price objective. If achieved, the soybeans should be sold. Carry in the futures market and basis improvement is unlikely to justify further storage.

Targeting a higher price objective may be unreasonable, given current fundamentals. The USDA projected in November that ending stocks would be 350 million bushels, versus 256 million a year ago, and a seasonal average farm price of $4.95 through $5.75 compared with $5.74 a year ago.

What happens to exports and prices depends largely on what happens to the Brazilian soybean crop. The USDA projected in November that Brazil would produce a crop of 58.5 mmt, compared with actual production of about 51 mmt during the past two years.