November 2012 soybean futures reached a high of $17.89 on September 4, but have declined sharply since then.

WIll there be an October surprise in soybeans

October's USDA reports could see better soybean yields ahead, says U of I's Darrel Good.

Compiled by staff

Published: Sep 26, 2012

University of Illinois ag economist Darrel Good says in looking at past years' Aug-Sept-Oct USDA crop reports it's not unusual for soybean yields in the September report to be below August estimates (happened 16 out of past 30 years), then to rebound higher in the October report (happened in 7 out of those 16 years).

Good says the average rebound in yield estimates from September to October's report was 1.3 bushels higher.

While soybean fundamentals have turned somewhat negative, he says there have been some positive developments.

First, early season weather in South America has not been perfect. While current weather does not threaten the upcoming crop, it is a reminder that the record crop there is not yet harvested.

Second, export sales of U.S. soybeans for delivery during the 2012-13 marketing year were reported at 779 million bushels as of September 13. That is a record level of sales for this time of the year and represents nearly 74 percent of the USDA's projection of exports for the year. Sixty-one percent of the sales are to China and 23 percent are to unknown destinations, so there is some concern about cancellation of some sales if prices continue to decline. In addition, the pace of exports during the first three weeks of the marketing year was very slow relative to the pace needed to reach the USDA projection for the year.

A third positive development is the decision by the EPA to increase the minimum biodiesel production from one billion gallons in 2012 to 1.28 billion gallons in 2013. That increase will likely require an additional two billion pounds of vegetable oil for biodiesel production. That increase represents about 7 percent of total U.S vegetable oil consumption in 2011-12. More than the minimum amount of biodiesel may be needed to meet the total advanced biofuels requirement in 2013.

A soybean price rally would not be expected at harvest time, particularly if the USDA confirms prospects for a larger crop. However, Good says the on-going tightness of supplies and the need to further ration consumption should provide some underlying price support through the end of the calendar year.

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