Soybean Balance Sheet
AgMRC Renewable Energy Newsletter
Created October 2008
Agricultural Marketing Resource Center
The soybean balance sheet can be thought of as a commodity counter-part to a financial balance sheet that centers on the supply and demand for money that is available to a business, an individual, or other institution, and how much will be left after all demands for funds are met. The financial balance sheets focus on assets, liabilities, and net worth.
In commodities, the focus is on available supplies, various sources of usage, and carryover (ending) stocks that are left at the end of the marketing year after usage has been met. If ending stocks are expected to be small due to reduced supply and/or increased usage, the price of the commodity will be high. Conversely, if ending stocks are expected to be large due to increased supply and/or decreased usage, the price of the commodity will be low.
The soybean balance sheet (along with other grain balance sheets) is unique because soybeans are produced only once during the year but used throughout the year. So carryover stocks (ending stocks) is the amount of soybeans remaining just before harvest of the next crop. This is why the marketing year extends from September 1 to August 31 of the following year.
With the rapid expansion in the ethanol industry, the profitability of converting corn and soybean oil to biofuels depends heavily on available supplies and other demands for these crops. Impacts of biofuels demand growth on other users of corn and soybeans also depends heavily on this same information. With the expansion in the biofuels industry and with government mandates that call for expanding production of corn-based ethanol as well as biodiesel through 2015, it is important to examine grain balance sheets from a multi-year perspective. A multi-year perspective for soybeans is shown in our latest balance sheets. We will monitor supply/usage conditions and keep the balance sheets updated.
The balance sheet lets you see the details of how soybean supply and usage are changing. They also show the potential impact on supplies (carryover stocks) remaining at the end or the marketing year, and on prices under a range of alternative crop yields.