Moderate Optimism About Bean Outlook

MOSCOW - May 3/00 - STAT -- Dry edible bean growers should be able to look forward to a modest recovery in prices during the opening weeks of the 2000-01 marketing campaign, believes University of Idaho agricultural economis Paul E. Patterson.

This is a key conclusion of the following outlook report for bean producers in Idaho, prepared by Mr. Patterson:

Dry edible bean growers are suffering through another marketing year with disappointing prices. Growers who switched to dry beans trying to avoid low prices on other commodities did not find the relief they had sought. Why such low prices? In a nutshell, supplies are too high and demand is too low. The 1999 U.S. dry edible bean crop was the second largest of the past ten years and the third consecutive year that the crop was bigger than the previous year's.

The production increases occurred despite falling prices because most growers had no viable alternatives. While growers did respond to the low prices in the 1998-99 marketing year by planting fewer acres in 1999, a nearly 200 pound increase in the average U.S. yield more than offset lower production from the reduced acreage. While domestic utilization remains steady, lower than expected exports have kept demand weak and contributed significantly to the lower prices.

Growers will attempt to reduce the abundant dry bean stocks by planting fewer acres to dry beans in 2000 according to USDA's March Prospective Plantings report. But Mother Nature could always confound farmers' plans -- as happened last year—or farmers could change their plans and plant more acres to dry beans. Even if we assume that last year's record yield will be repeated in 2000, production would fall to around 31 million cwt in what I would call the worst case price outlook scenario.

With just an average yield of 1,600 cwt per acre, production would fall to 27 million cwt. Low prices should help improve export demand and Mexico has allocated import certificates for 48,000 metric tons of duty free dry beans from the United States. With reduced supplies and better demand, prices for the 2000 crop will improve compared to 1999 as stocks decline. Growers should see prices average $2 – 4 per hundredweight higher in the 2000-01 marketing year.

Review of 1999-00 Marketing Year

Depressing is the best term to describe dry bean markets over the fall and winter months. Even though prices at harvest were below cost of production, they were the highest prices that growers have seen this marketing year. Prices in March were from $1 to $3 lower than last fall. Pinto prices that started the marketing year in the $17.25-17.75 range were down to $15.50 in January and down another dollar to $14.50 in March. The price of Great Northerns held up better than other classes. They started the marketing year in the $17.25 to $17.50 range and were at $16.75 to $17 by January. By early April they had moved up to $17. While it would be hard to call this a price rally, Great Northerns are the only class of beans grown in Idaho to experience any price improvement. Pinks were trading in the $16 to $16.25 range at harvest and were mostly $13.75 by the first of the year. They dropped another $.25 by February and have stayed at $13.50. Small Reds experienced a similar decline. They were trading at $16.50 to $17.25 at harvest and were down to $14 by February where they've remained.

Idaho's average dry bean price reported by the Idaho Agricultural Statistics Service, a composite price for the various bean classes grown in Idaho, peaked at $17.10 in October. It is now under $15 and will likely average around $15.80 for the September to August marketing year. This is over a dollar off the 1998-99 marketing year average price of $17.

Because supplies appear to be more than adequate to meet current demand, it is unlikely that dry bean prices will improve much in the last half of the 1999-00 marketing year even though June prices are typically the highest of the marketing year, at least on average. Examples of how prices have historically changed from March to June are shown in Table 2. Price changes are calculated for a 5-year average, a 10-year average and the 1998 marketing year prices for Pintos, Great Northerns, Small Whites, Pinks and Small Reds.

Exports for the first three-quarters of calendar year 1999 were 29% below the same period for 1998. Exports were off for all classes of dry beans. For the dry bean classes grown in Idaho. Great Northerns were off 45.6%, Pintos were off 25.9% and Small Reds were off 15.9%. Small Whites are not tracked as a separate class for exports.

2000 Planting Intentions

U.S. projected-planted acreage for 2000 is down 186,000 acres, or nine% from 1999. This is certainly positive news and should help reduce the stocks of dry beans that are weighing down the market. But the actions of individual states certainly need to be considered when evaluating the planting intentions report, particularly for the impact by market class.

Together, North Dakota, Colorado, Nebraska and Idaho accounted for 81% of the Pinto production over the last three years. North Dakota, which accounts for one-third of the U.S. dry bean acreage, is down only 3%, or 20,000 acres. Keep in mind that Pintos have accounted for around 70% of North Dakota's acreage in recent years and they have been producing over 40% of the U.S. Pinto crop.

Colorado and Nebraska, the other two major Pinto states besides Idaho, will decrease planted acreage by 13 and 14%, respectively, or 50,000 fewer acres growing dry beans. Over the past three years, 86% of the acreage in Colorado has been planted to Pintos, and in Nebraska it has been over one-third. Idaho is projected to plant 15,000 fewer acres of dry beans, for a 14% reduction. Only 30% of Idaho's dry bean acreage was planted to Pintos in 1999, compared to 39% and 42% in 1997 and 1998. Idaho's share of the Pinto production is also declining. Idaho produced 6.0% of the U.S. Pinto crop in 1999, 6.3% in 1998 and 7.7% in 1997.

Nebraska and Idaho combined produce over 90% of the Great Northerns. But Nebraska alone accounts for 85%. The 14% acreage reduction in Nebraska, 30,000 acres, when combined with Idaho's acreage reduction should definitely help the price outlook for Great Northerns.

While Small Whites, Small Reds and Pinks are less important than Pintos in Idaho when measured by acreage or production; Idaho tends to dominate the production of these three bean classes (Table 3). Because these three classes are a relatively small share of the total dry bean market, an acreage change in Idaho can dramatically affect production and therefore price of these classes. An acreage reduction in Idaho can certainly be viewed as positive news for all three of these bean classes.

Projections For 2000-01

Trying to predict prices for individual market classes is extremely difficult considering the lack of accurate stocks information. Because I lack information to the contrary, I'm assuming that the percentage acreage changes predicted for 2000 will be proportional on all market classes grown in that state.

With exports expected to be up and production expected to be down, prices on all bean classes should move up in 2000-01. The price improvement will not be uniform, however.

Small Reds appear to have the weakest fundamentals, and with no acreage reduction projected for Washington and only a 6% reduction for Michigan, it's difficult to see prices moving much above $16. The current fundamentals are also fairly poor for Pinks, but reduced production based on the 2000 planting intentions should reduce supplies since two of the three big Pink producing states are reducing acreage.

Idaho will be down 14% and Minnesota is projected to be down 22%. The one fly in the ointment is North Dakota, projected to be down only 3%. The price for Pinks should return to the $16.50 to $17 range.

The fundamentals for Small Whites and Great Northerns appear to be about the same. The major producers of these classes will either be down or unchanged. Prices of both classes should return to the $18 to $20 range.

Pintos, the largest class produced in Idaho. presents the biggest challenge in trying to predict a price range this year. Three of the major players, Colorado, Idaho and Nebraska are all projected to plant 13-14% fewer acres. But the big player, North Dakota, is only predicted to reduce acreage by 3%. Pinto prices in the $16 to $18 range are most likely for the 2000-01 marketing year. The high end of the range could go up another dollar with strong export demand to Mexico.

Unless constrained by weather, U.S. dry bean production in 2000 should fall between 28 and 30 million cwt. Production at these levels should keep the average Idaho price for the 2000-01 marketing year in the mid to high teens, $16 to $19 per cwt. While U.S. production over 30 million cwt is unlikely, Idaho's average price would stay in the $14-16 range if it did occur. U.S. production between 26 and 28 million cwt would mean an average Idaho dry bean price around $19 - 21 per cwt.

The price scenarios for the 2000 crop assumes exports of at least 8.5 million cwt and steady domestic utilization. If exports were to hit the 10 million cwt level as they did in 1998, prices would average $1.00-$2.00 higher across the various production scenarios that I've presented.

Also keep in mind that my projections are based on the projected dry bean acreage given in USDA's March Plantings Intentions report. Actual acreage planted will be different. The issues are how much different and will the differences be positive or negative.

But unless there is some unexpected constraint on production or exceptionally strong export demand, prices will remain below cost of production when all costs are included. With total production costs of around $500 per acre, Idaho growers would need prices close to $22 to break even.

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