Soybeans Seeking New Fundamental Base

CHICAGO - Feb 13/06 - SNS -- Soybean prices are not high in absolute terms, but they are given the current international supply and demand situation facing the crop, argues Darrel Good, Extension Economist, University of Illinois.

Ultimately, prices need to come in line with the underlying fundamentals, whatever they are. "For evidence that commodity prices do eventually align with fundamentals, one has to look no further than the natural gas market and the 50% decline in prices since mid-December," Good notes.

"On the surface, there seems to be some disconnect between known fundamentals and the level of soybean prices. On the other hand, the market may be looking beyond the current surplus, anticipating a resurgence in consumption and/or a decline in U.S. production in 2006.

"Talk of the La Nina weather pattern persisting for another three to six months likely raises concerns about widespread drought conditions during a portion of the 2006 U.S. growing season. Potential weather and crop problems get the attention of speculators in a big way and perhaps that is occurring early this year. As the growing season progresses, soybean prices will align with the overall supply and demand situation."

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