Soybean Market Gets a Surge in Demand

Crop prices may follow petroleum as demand increases.

Published on: May 19, 2009

The price for soybeans has surged during the last few weeks and the projection for the crop has gone up in terms of acreage, too.

"It has to do with the demand being up high enough to use up all the expected production," says N.C. State University soybean specialist Jim Dunphy. "The laws of supply and demand still hold."

Agricultural Prices, a report released April 30 by the National Agricultural Statistics Service division of the U.S. Department of Agriculture put the price of soybeans at $9.89 per bushel, an increase of 77 cents from March.

In terms of percentage the price on April 30 was up 7.9% from the previous month. That was still down 18% from April 2008 but up enough to boost grower confidence. Note that the soybean price was still down $2.11 compared to April 2008. However the price is better than soybean producers historically have come to expect.

With a limited acreage for farming, commodity crops are typically locked together in terms of price. When one crop sees increased demand early in the year more acres flow to that crop leaving the others in shortage, which in turn boosts demand and prices for those crops as well.

Dunphy says he thinks this dynamic is what we have been seeing in the marketplace.

"The demand (for soybeans) is high enough that the projected production wasn't going to meet the demand," he says. "Whether we've got enough total acres - corn plus soybean plus cotton to go around - I think remains to be seen. The demand for corn is still pretty strong and the demand for soybeans is pretty strong. If we take enough acres out of cotton, for example, to put into corn and soybeans, then the supply of cotton will be low enough that the demand will be relatively high on that. Whether we have enough acres to meet the demand for all three crops, poses an interesting question. I'm not sure whether we do or not."

Price increases in the market also depend on the amount of carryover of a particular crop from one year to another, of course.

Dunphy says the biggest challenge for soybean growers this spring is getting the soybeans planted in areas where it is wet – "which includes most of North Carolina."

Wet weather has commanded much of the ground in parts of the South as well as in parts of the Midwest. Dunphy believes soybean growers could be significantly delayed in many areas by saturated fields.