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U.S. soybean prices began a price slide in mid-1997 that persisted throughout 1998 and well into 1999, cutting the value of a bushel of soybeans by over 50 percent during the decline. Prices reached a low of $4.015 per bushel, basis nearby Chicago futures, on July 9, 1999, a price level that soybean futures had not seen since early 1973. Although futures recovered to over $5.00 per bushel in late summer, the rally lacked momentum and towards yearend futures were again trading below $5.00 per bushel. The entrenched weakness reflected both near record 1999/00 world supplies and ending carryover stocks. The 1999/2000 world production total of 153.9 million metric tonnes trailed initial forecasts by about 1.1 million tonnes, as well as the 1997/98 record large world crop of 158 million tonnes. Still, production proved well above the growth trend of the early 1990’s when production averaged less than 120 million tonnes. Although the 1999/00 U.S. crop proved to be smaller than expected, a near record large 2.7 billion bushels (73.4 million metric tonnes) were still realized. The U.S. produces nearly half of the world’s soybeans, with Brazil, the second largest producer, about a third. Soybean production is expanding is a number of countries, but both the U.S. ranking and Brazil’s runner-up slots are well entrenched. A key question continues to focus on China, who during the past few years has vied with Argentina as the world’s third largest producer. In 1999/00, China produced 14 million tonnes and Argentina 18 million; both forecasts were under the record large 1997/98 crops of 15 million and 19 million, respectively. The odds would seem to favor stronger growth in China in line with their expanding poultry flocks and the derived need for high protein soybean meal. However, as China’s economy becomes more market sensitive growers may switch to higher priced crops as happened in the mid-1990’s when soybean acreage was moved into corn and cotton production. It is possible that China’s soybean acreage has temporarily peaked at around 8 million hectare, suggesting that further production gains will be dependent on realizing higher average yields, estimated at 1.79 tons per hectare in 1999/00. Brazil’s soybean crop is sown about the time the U.S. crop has been harvested. Brazilian 1999/00 production was forecast at 30.5 million tonnes in 1999/00 vs. 31 million in 1998/99. Percentagewise, Argentina’s soybean production shows the fastest year-to-year gain in the 1990’s. However, unlike Brazil, Argentine soybean farmers have significantly lower production costs and a better transportation structure. Brazil soybean acreage is nearly double Argentina’s, 12.5 million hectare vs. 7.5 million in 1999/00, respectively. The 1999/00 yield per acre in both countries is about the same, 2.44 tons per hectare in Brazil vs. 2.40 tons in Argentina, although generally Argentina’s soybean yield is higher. Brazil’s crop year runs from February to January, Argentina’s is from April to March. World soybean trade in 1999/00 of a record large 41 million tonnes compares with 1998/99’s 40 million. The U.S. now accounts for almost 60 percent of world exports, 24 million tonnes in 1999/00 vs. 22.1 million in 1998/99. This percentage has fallen since the early 1990’s. Brazil’s exports, however, more than doubled in the decade, totaling 9.4 million tonnes in 1999/00 vs. 9 million in 1998/99 and about 3.5 million in the mid-1990’s. Importing nations are more numerous, the biggest are generally the European Union at 16.1 million tonnes in 1999/00 with Germany taking 4.8 million, and Japan with 4.6 million tonnes. The ending 1999/00 world soybean carryover of a lower than expected 22 million tonnes compares with the year earlier 23.8 million. Generally the U.S., Brazil and Argentina account for most of the world’s carryover stocks. U.S. farmers harvested a record large 72.8 million acres of soybeans in 1999 vs. 70.4 million in 1998. The average yield of 37 bushels per acre was lower than expected and compares with 38.9 bushels in 1998. Iowa is the largest producing state, with Illinois a close second followed by Minnesota and Indiana. The U.S. soybean crop year begins September 1. Carryover stocks on August 31, 1999, of a near record large 348 million bushels, lifted total 1999/00 supplies to 3.1 billion bushels vs. 2.9 billion in 1998/99. Total disappearance in 1999/00 was put at 2.7 billion bushels, of which at least 1.6 billion will be crushed, 900 million exported, and about 154 million allocated to seed and residual. Carryover as of August 31, 2000 is forecast at a record large 385 million bushels. Projected carryover as a percentage of usage in 1999/00 was forecast at about 14 percent, twice that of 1997/98. U.S. soybean exports have seen a strong shift in regional demand during the past two years. The traditional European market has come to represent a smaller share of U.S. exports, while Asia and Mexico have increased their importance to U.S. exporters. Asia’s share is expected to increase due to the area’s improved economies and the shift away from importing meal and choosing instead to process soybeans. Historically, when a more positive soybean usage outlook takes hold it’s apt to show in early calendar year prices. Demand bull years in soybeans generally show counterseasonal strength in January and February, however, if total usage holds neutral, and/or weakens, then futures prices tend to witness what is referred to as the February break. If the latter develops, it’s not unusual for prices to penetrate the harvest lows of the previous October-December quarter. The U.S.D.A.’s average price received by farmers in 1999/00 was forecast at $4.75 to $5.25 per bushel vs. $5.02 in 1998/99. The highest farm price during the past decade was $7.35 in 1996/97, and the previous low, prior to 1998/99, had been $5.56 in 1992/93. Futures Markets Soybean futures are traded on the Bolsa de Mercadorias & Futuros (BM&F), the Mercado a Termino de Buenos Aires (MAT), the Dalian Commodity Exchange in China, the Tokyo Grain Exchange (TGE), the Chicago Board of Trade (CBOT), and the Mid-America Commodity Exchange (MidAm). Options are traded on the MAT, the TGE, the CBOT and the MidAm.

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Excerpted from the CRB Commodity Yearbook.