For the past several months it has been impossible to talk about soybeans without mentioning China in the same breath. Even though trade talks between the U.S. and China have taken place and there are rumors that China may purchase U.S. soybeans, there has been nothing definite or in writing and so the rumors continue.
“Every fundamental in the market right now is China,” said Betsy Jensen, Northland Farm Business Management and a farmer/marketer from Stephen, Minn.
“There is some discussion about acres for 2019, but it really goes back to China and what are they going to do and when is this trade agreement going to be signed and how much is China going to end up buying,” she added.
“Nobody knows. There are no answers to those questions at this time. China and soybeans are our biggest problems right now.”
Another discussion that has come up in relation to this is whether the U.S. has lost a portion of that market permanently.
“Has China found alternatives to soybeans? They’re going to be pretty creative when you don’t have a product on hand, so have they found something else that they would like to use besides soybeans? There still is a lot of uncertainty in the market,” she said.
Jensen pointed out that a USDA outlook conference was scheduled for mid-February, but the numbers that come from the outlook conference are not survey-based. These are economist-based numbers, computer models, and not actual farmer surveys.
“You are going to see numbers come out about acres and production, but it’s not based on any phone calls or surveys with farmers,” she said. “So, when you do see preliminary numbers on soybean acres it’s nothing you want to put a whole lot of value in. It’s more of a long-term conference than it is looking at 2019. The outlook conference is valuable for a 10-year time frame but it’s not valuable for making 2019 decisions.”
Looking ahead to the upcoming growing season soybean acres for 2019 in the Northern Plains are anticipated to be down.
“Wheat is actually beating soybeans, but barely. It’s kind of a coin toss,” Jensen said. “It seems like in the Northern Plains we’re more consistent with wheat yields than we are with soybean yields, so part of it depends on a farmer’s confidence in their soybean production.”
Jensen is also not planning on a market facilitation payment for 2019 and is hoping the trade dispute with China will be settled.
“Hopefully we’ll have the tariff situation resolved and we won’t need any government assistance so the price that you’re getting today is the price you’re going to get. That’s the price we have to plan on,” she said.
“It really has been slightly favorable for wheat, but not by enough that I see many acres change,” she added. “Overall, when you look at the corn to soybean ratio it is boring. There is no attempt to buy acres or sell acres or to pick corn over soybeans.
“It’s really a wash at this time. There’s not one that favors another. It’s pretty boring.”
The million-dollar question, according to Jensen, is what are producers going to get for basis this year?
“I’m still trying to plan on the $1 under basis at harvest which gets us right around that $8.50 cash,” she said. “If you can make money at $8.50 cash soybeans, that’s a number that both North Dakota and Minnesota FSA are advising, a little less than $8.50 on your cash flow.
“That’s where we are today and I think the biggest unknown is going to be the basis,” she continued. “Are we going to start shipping beans to the PNW (Pacific Northwest) and will basis go back to more historical levels? And that’s a question we won’t know for quite a while.”
As of Feb. 20, local cash soybean prices at one elevator in west central Minnesota regularly followed in this column were $7.91 a bushel for March and basis was $1.04 under. September 2019 corn was listed at $8.35 with basis $1.05 under.
While there have been very little soybeans going out of the PNW to China there’s always activity for soybean exports, according to Jensen, adding there are a lot of purchases and a lot of cancellations and that’s been very difficult to decipher.
“Who is buying soybeans and how much? So, there are still very limited amounts going out of the PNW. We don’t see much coming out of there,” she said.
Even though the government has reopened USDA is still behind on getting reports out. As a result, export sales are still a major unknown which is a huge concern right now with the market.
“We don’t know what’s going on with the tariffs. We don’t know how many soybeans we’ve sold, so there’s a lot of balls in the air right now for soybeans,” she said.
One of those balls is a looming deadline for a potential increase in the amount of goods coming from China to the U.S. If the trade dispute isn’t settled by March 1 the U.S. has said it would impose an additional tariff on China. But will it?
“The one thing our president is consistent on is his unpredictability. He’s consistently unpredictable. He zigs when you think he’s going to zag,” Jensen said. “He keeps us on our toes as far as crop marketing.
“Even though there is a deadline of March 1 for an increase in tariffs, I don’t know how firm that deadline is, if there will be extensions, or if there will be an agreement reached in the meantime. That’s the ultimate goal,” she added.
With that and planting time on the horizon, Jensen wants to encourage farmers to look ahead to 2019 sales. There’s still a good carrying charge and the fundamentals are still not bullish.
“This is still a bearish market. We still have too many beans and we still aren’t exporting them,” she said. “We are banking on hope to keep prices where they are.
“If you haven’t sold any, you need to take a strong look at potentially pricing some of them,” she advised. “Even if you don’t want to do it off the combine look at maybe into March (2020) if you want to put them in the bin for a little while waiting for basis to improve. There is still a carrying charge. The market is paying you to store your soybeans, but you need to price them in order to obtain that carrying charge.”