Like a jet airliner flying above a major airport in a continual holding pattern, that’s the U.S. soybean market.
Despite ongoing discussions and negotiations, the trade war with China continues. Although there have been rumors that China is going to reenter the market and buy a large amount of U.S. soybeans, they remain just rumors. As a result, the soybean market remains in this holding pattern, waiting for something to break, either an end to the trade war with some sort of resolution, or at least for the rumors to become fact with a solid purchase.
On the demand side, it’s described it with two words: Trade war.
“What else can you say?” said Ed Usset, grain marketing economist with the University of Minnesota. “As long as we’ve got that (trade war) going on, the demand side is not going to be very pretty.
“Rumors are wonderful, eh? But what do you do with them?” he continued. “It’s a giant holding pattern is where we are right now.”
Although negotiations with China are continuing, there is some concern whether the U.S. will lose market share to China if the dispute continues without resolution. China has been purchasing beans from other sources during the standoff and the concern is that they will continue to go back to those sources even after the trade war ends. In some circles, the feeling is that China may go to those sources in the short-term but would return to the U.S. for soybeans over the long term. However, no one knows for sure how that will all play out.
In the meantime, with slow demand local cash soybean prices continue to languish in the low $8 range. As of March 19, local cash soybean prices at one elevator in west central Minnesota regularly followed in this column were $8.08 a bushel for March and basis was 95 cents under. September 2019 corn was listed at $8.37 with basis of $1 under.
Usset noted that in southern to southwest Minnesota, prices are in that $8.10 to $8.30 range while new crop prices are closer to $8.50-$8.60.
Still, producers need to be looking for opportunities to move some soybeans.
“Neither one is a thriller, but we’ve been worse and we could be worse, so we’ve got to take a hard look at that,” he said.
“I’m looking at November beans that spent a lot of time above the $9 mark,” he said, adding that those prices were at $9.50-$9.60 for several months. “And even now, today as I speak, we’re at about $9.40 for November futures. Is this a great sale? No, it’s not. Is it a place we might need to get started? Probably.
“If they haven’t done so...we can hope for another rally, but you have to sit up and pay attention.”
The market and producers are now turning their attention to spring planting and the upcoming USDA Planting Intentions Report which is due out the end of this month. Because of the slow demand and lackluster prices, many analysts are predicting a reduction in soybean acres in 2019.
“Look at USDA’s February Ag Outlook report,” Usset said. “I think they had soybean acres off by 3 million acres from last year, and most of those acres going to corn and wheat. I can’t disagree with that. But it’s all going to come down to planting progress, or a lot of it will come down to that, just how well farmers do with planting.”
Last year soybean acres totaled around 89 million and this year the early USDA projection is for around 85 million.
That said, soybean acres could change from that depending on whether there is a late spring and how that may impact planting decisions.
“Late planting, if you don’t get the corn planted in time you shift to soybeans, so that could moderate that number,” he said. “But who knows how that will shape out. We’re looking at it.
“People are going to follow the climate stuff and if we are running late that’s going to be favorable to bean acres and not favorable to bean prices, and unfavorable to corn acres and possibly modestly favorable to corn prices,” he concluded.
For now, the soybean market remains in a holding pattern.