All of the above statements describe the soybean market in different weeks of October 1997. None are unusual; what is unusual is that they are occurring at the same time.
As the tables above illustrate, a large U.S. crop usually leads to low prices. The opposite is often true, too -- with a small crop, there are fewer bushels to sell, but prices are higher. Many farmers now have the best of both worlds -- good yields and higher prices. It's due to three key factors:
1) Global feed demand for corn, soybeans and soybean meal continues to grow. The world economy continues to expand and global meat production continues to increase.
2) The smaller crop in South America last year is sending the whole world (including Brazil and Argentina) into the U.S. soybean market until supplies are available from South America in March.
3) U.S. farmers did a great job of holding off on sales when prices dropped into harvest lows. Even though exceptionally good weather allowed for rapid harvest this fall, farmers priced very few beans.
The U.S. corn crop value (see corn table) shows a crop worth $18-20 billion from 1990-92.
Slow exports, large supplies of global feed wheat and a small corn crop dropped the total crop value to just $16 billion in 1993. From that major low in value, corn prices and profits have soared. Our current projection is that this year's crop will be worth over $27 billion.
The soybean table shows how dramatically U.S. bean crop revenues have increased in recent years.
For four years, from 1990 to 1993, the U.S. soybean crop was worth $11.5-12 billion. Since the crop and income disaster in 1993, soybean crop size and crop revenue have soared higher. This year's crop value is currently projected to hit close to $19 billion. If soybean futures rally another 50¢ per bushel, it could increase to over $20 billion.
How long can this last? The value of the U.S. corn and soybean crop is in a definite uptrend. Unless a global recession drops worldwide corn and soybean demand, look for crop revenue to continue to increase.
Higher prices are required to keep up with increasing costs that have raised production costs by at least 18% since 1994. Most producers with vivid memories of the 1980s slump are using increased profits to cut debt and increase efficiency.