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Fundamentals largely unchanged, but soybean prices soar
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Fundamentals largely unchanged, but soybean prices soar

Soybean

Although the market fundamentals for soybeans have remained largely unchanged over the past couple weeks, that has not been the case for soybean prices, which have risen dramatically.

In fact, as of April 27, the soybean market had enjoyed nine consecutive days of rising prices with local prices ranging well above $15 per bushel. Looking at prices in the region, at one local elevator in west central Minnesota regularly followed in this column, as of April 27, the May cash price for soybeans was $15.38 and basis was -5 cents under. The October 2021 futures price for new crop soybeans was listed at $13.61 and basis was -1 cent under.

“Nine days in a row higher and $2 a bushel higher for the May contract. That takes your breath away,” said Ed Usset, professor emeritus and grain marketing economist with the University of Minnesota, adding that he was at a loss to explain the sudden jump in prices, and not just for soybeans, but corn and wheat, as well.

“And yet the story on the demand side – and it’s a great story – but it’s no different today than it was two weeks ago.”

One possible reason for the rise in prices is that continued strong global vegetable oil prices and the possibility of less acres being planted later this spring are providing positive forward momentum for the various crops.

“Vegetable oil prices in general have been skyrocketing of late. Vegetable oil and soybean oil this last week or so took off and I can’t explain that,” he said. “But certainly it’s good news for the soybean complex. I can’t explain it, but it has taken off.

“I saw some numbers on the soybean oil basis just going through the roof in a matter of days and I don’t know the story there. Maybe over time it’ll come out,” he added.

But with planting underway and prices rising as they have been, it’s also possible that producers may react and decide to change up their planting decisions.

Something that has caught Usset’s attention recently is that soybean plantings are a little ahead than corn. Typically corn planting has gotten off to a faster start than soybeans.

“People are starting to plant soybeans before corn. I’ll be interested to see how this shakes out and what the actual numbers are,” he said. “I’m just hearing anecdotal stories about that, but it does seem to come out in the planting numbers, because soybean planting is more ahead of schedule than corn. It seems to indicate people are working soybeans harder.”

As stated earlier, the fundamentals haven’t changed a great deal. China is still in the market for soybeans and is pushing things on the demand side.

“Oh, absolutely,” he said. “The Chinese demand numbers have looked good, they’ve looked great, but I’m not seeing or saying ‘look at that big sale,’ or ‘look at that new forecast’ or something like that that’s come out in the last two weeks. It’s just a good ol’ bull market.

“A fancy term for this would be ‘buyer imbalance.’ A lot of people want to go in and no one, or not many, want to go against it,” he continued. “So, here we go. We’ve got a lot of buyers and there are sellers saying, ‘Well, let’s take a break here for a bit,’ and up we go, because nine days and $2 higher – we haven’t seen that in a long time.”

In the near-term, Usset said the market will be keeping a close watch on the weather and planting progress to take its cues. That’s what it’s focused in on.

Will soybean’s planting pace continue to run ahead of corn? Will prices continue or remain on this current trend and what effect will that have on planting decisions? Will producers switch from corn to soybeans, or soybeans to wheat, for example?

“I don’t think there’s anything earthshaking or any bad news in regards to planting,” he said. “We’ll watch the weather though. We want to see rain coming in and things like that.”

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