The announcement of loan rates is important news to farmers, as they prepare for the approach of spring planting.
The big story centers on soybeans. Last year, 73.4 million acres were planted in beans but this year that number could be as high as 74.5 million acres. Due to last years drought and poor yields, a few analysts are seeing the number down a mere 300-thousand over last year.
This number has caused at least one analyst to suggest that the U.S. could run out of beans by mid-2004. To avoid the crisis, demand in the second half of the year demand would have to drop by 18%, or approximately two million tons of beans.
Much of this is predicated on certain unknowns about the South American market. It has been projected that 96 million metric tons, or about 3.5 billion bushels, of soybeans will be harvested in Brazil and Argentina. In the past, South America has only had to satisfy demand for a few hundred thousand tons but some analysts are unsure if the six-fold increase could be met and at what cost per bushel.
The market appears to have reacted to this and other news by establishing nearby contract prices above $8. A view farther down the pipe reveals contracts for August 2004 at slightly above $7.